Focus DIY boss critical, credit insurers need regulation
Retailers led by Focus DIY boss Bill Grimsey have said the planned government credit insurance top-up scheme will not work because it misses firms that have had cover withdrawn.
In a letter to several newspapers, Grimsey said the scheme would have: “no real impact where it is needed most, and a marginal impact elsewhere.”
He said: “The proposed scheme appears to allow the government to top up credit insurance where it has been reduced but not where it has been fully withdrawn, as it has been with us. This will leave many firms, including ourselves, in the cold but will provide top up for the players perceived to be stronger who have some insurance cover in place. This widens the gap and increases pressure on suppliers who, for us, have been very supportive partners.
Credit insurance should be regulated
The Times also quoted Adam Plainer, a restructuring lawyer with Jones Day, who demanded regulation of credit insurers: “Whilst top-up insurance may provide a stop-gap solution to the current crisis, the Government urgently needs to consider regulating the whole credit insurance industry.
“The problem with credit insurers is they have not been properly considered by the Government as stakeholders in a distressed situation and there is no legislation which compels them to come to the table in a restructuring.
"The fact that they can pull their lines of credit often means that out-of-court restructurings are not viable and the only solution is administration.
“This clearly runs counter to the rescue culture the Government claims it has been attempting to promote.”
Criticism of credit insurers
Grimsey’s letter was scathing of credit insurers: “The credit insurers, effectively a tight-knit oligopoly in the UK, appear to be acting as de facto credit rating agencies, publicly withdrawing insurance for companies in various sectors at very short notice. This withdrawal is interpreted as a death knell for the companies concerned and may indeed hasten their demise.”
But he said the death knell for Focus, when cover was withdrawn in November, proved a false alarm and “the ringing noise was in fact that of our tills.”
