News

Paper merchants are facing "the most difficult business environment for a decade" and may find credit insurers withdrawing from the sector, according to credit insurance broker Aon Trade Credit.

Speaking at the National Association of Paper Merchants’ (NAPM) policy group, the broker revealed the industry had claimed more than £10m for debtor insolvency over the past 12 months and warned credit insurance costs could rise by up to 10%.

James Bowker, leader of the paper sector at Aon Trade Credit, said: “Paper merchants have been hit by a number of debtor failures and some credit insurers are now losing their appetite in this sector, which is facing the most difficult business environment for at least a decade.

“We’re working with those insurers closest to the sector, who are the most willing to visit our clients’ customers and have the best understanding of the issues.”

The broker attributed the insolvencies of paper merchant’s debtors to businesses failing to absorb the increases in fuel and power costs, as well as problems arising as a result of banks failing to renew facilities.

It also said the 15% deterioration in sterling against the euro was forcing merchants to push through additional price rises. The broker also said administration pre-pack deals now account for 25% of credit insurance claims.

Over the years, merchants have frequently spoken out against pre-pack deals, with customer insolvencies and pre-packs termed a supplier ‘stitch-up’.