Xavier Denecker, managing director of Coface in the UK and Ireland, says business could see trade credit insurance premiums increase as well as cover reduce if their customers suffer weak trading in future. In order to combat this, businesses should be using CreditPal.

Businesses will see trade credit insurance premiums increase as well as cover reduce if their customers suffer weak trading in future, one leading insurer has said. But contrary to claims by the Business Department, the credit insurance industry will survive the recession, Xavier Denecker, managing director of Coface in the UK and Ireland, has insisted.

Coface, which has 1,500 business customers in the UK, has begun a two-month transition to new contract terms with its customers as part of a shift in its business model. The insurer has said premiums will remain higher than those seen before the recession because past premiums did not accurately reflect the risk that businesses would fail to pay their bills.

It added that businesses would in future be expected to be far more transparent about their current trading performance in return for trade credit insurance cover for their suppliers. As part of this process, Coface will begin giving its customers its credit score for the businesses they are supplying to explain more clearly decisions to restrict cover and price policies.

Mr Denecker said these scores would be accurate 95pc of the time but he encouraged businesses to challenge Coface if they had evidence that trading was better or worse than the insurer understood. Successful challenges would result in a move in the premium and cover within seven days in most cases, he said, which would allow businesses to extend credit to customers that suddenly began ordering more stock.

Christopher Poll, chairman of Future Route, the provider of CreditPal, explains how small businesses can avoid toxic debts as they gear up for economic recovery.

Most people find safety in numbers because they give a sense of security and comfort – but only if the numbers are other humans doing the same thing.

This view does not always apply when businessmen are faced with the numbers contained in a set of accounts. Then the opposite happens. Fear and trepidation can result in delegation of these numbers to a third party, usually an external accountant.

Not only does this remove management from direct interchange with the lifeblood of their business, but it is also costly and takes time, exacerbated by the fact that many accountants are ill equipped to offer the frequent accounting services required by businesses today.

The current credit crisis has forced big changes both on small and medium-sized enterprises (SMEs) and on how the finance and credit industry, as well as supply chain managers, lend and provide finance and credit.

If SMEs are to survive, and then start growing out of recession, owners and managers must be on top of their own numbers – and of those with whom they do business.

While trade credit insurers made record claims payouts totalling £320m in 2009, one of the industry leaders, Coface, has just launched an initiative with CreditPal to improve risk assessment.

The figure is a 95 per cent increase in payouts made in 2008, which totalled £164m. The increase was attributed to the ongoing effects of the global recession and the liquidity crisis facing UK businesses.

Trade credit insurers dealt with 22,791 claims in 2009. The highest amount of claims payments (£125m) came in the third quarter, before a drop to just under £75m in the final quarter.

In response to new data showing improved export growth for the UK’s small manaufacturers, Professor Russel Griggs, chairman of the CBI’s SME Council, warns that access to credit remains a headache for some firms.

Demand for goods made by the UK’s small and medium-sized manufacturers is improving at home and abroad, and production has stabilised, according to the CBI. But the business group warned that cost pressures have intensified and access to credit remains a headache for some smaller firms.

Of the 402 manufacturing firms surveyed for the CBI’s quarterly SME Trends Survey, 36% reported a rise in the volume of total orders in the three months to April, and 26% a fall. The resulting balance of +10% is the first significant growth since January 2008 (+10%).

A better-than-expected rise in export orders, thanks to the relative weakness of Sterling, accounted for much of the improvement. A third of firms (33%) said export order volumes increased, 15% said they declined, giving a balance of +18%. That is the strongest balance since July 1995 (+21%).

The volume of domestic orders is also stabilising. 31% of companies reported a rise, and 28% a fall, giving a rounded balance of +2%. Manufacturing production remained steady during the quarter with a balance of +3% seeing output grow.

However, firms are seeing profit margins squeezed because of rising commodity and raw material prices, with a balance of +21% of firms reporting a rise in average unit costs. That was the fastest growth in costs since January 2009 (+27%), and compared with a balance of +9% in the January quarter.
Meanwhile average domestic prices stabilised (a balance of +2%) after five consecutive quarters of deflation. But, output prices are expected to pick up over the next three months (+11%).

Access to credit continues to prove a challenge for some firms. 12% cite credit or finance constraints as likely to limit export orders, and 7% say they are likely to act as a brake on output. Both figures remain above their long-run averages.

Russel Griggs, Chairman of the CBI’s SME Council, said:

“The UK’s smaller manufacturers are finally reaping the benefits of all their hard work as well as a relatively weak currency. Exports are growing steadily, domestic demand and production are stabilising, and firms are feeling more upbeat about prospects.

“With demand expected to grow in the coming months, manufacturers are thinking about taking on extra staff over the next three months.

“However, firms are experiencing a sharp rise in raw material costs which is squeezing profit margins. But they do expect to recoup some of this by raising prices over the next quarter. It is also still a concern that access to credit remains a headache for some firms.”

Coface team up with CreditPal to enable their SME buyer risks to submit summarised management accounts exclusively to Coface in order to obtain the best level of credit insurance cover on themselves.

Coface UK & Ireland are launching a new initiative which continues to improve dialogue and maintain confidence between businesses trading on credit, in line with its Transparency Charter.


Now more than ever, keeping a business’s credit status up to date is a crucial activity, either for businesses at risk of their credit rating declining, should their latest filed financial results be poorer than those filed before the recession, or for businesses showing either a stable or improving position on their financial accounts.

This is where Coface, in association with a new service called CreditPal and information partner Graydon, have joined forces to help businesses update and ultimately improve the accuracy of their credit rating.

By registering with Coface’s Transparency Charter and accessing CreditPal’s online platform via the Coface website, a business of any size can upload its financial data directly from their accounting package. This data is first validated for its accuracy and quality and then shared with Coface’s information partner Graydon, who will analyse the financials in order to express a credit rating. The business can then choose to share this report with Coface.



Andrew Share, Coface Credit Management Services Director, comments “This initiative, starting mid April 2010, empowers businesses to gain the best credit assessment for their business. We are delighted to have a partnership with CreditPal, a secure and unique online service that collects, validates and standardises management accounts in order to provide up to date credit information and recommendations.  It is an exciting opportunity for businesses to proactively update their credit rating, and ultimately obtain the best level of credit insurance cover on themselves. In doing so we are enabling every UK business to obtain the best possible terms and conditions for trading on credit.”



Martin Williams, Managing Director of Graydon, adds “The CreditPal Service, in association with Coface and Graydon, provides an opportunity for UK businesses to have their current creditworthiness assessed based on up to date monthly management accounts. Without this service, too many businesses may be held back from trading out of the economic crisis by poor looking statutory accounts covering the recessionary years of 2008/2009.”



Chris Poll, Chairman and CEO of Future Route, provider of CreditPal, concludes “The credit crisis and resultant drought of finance and credit emphasised to every UK business that it is essential for them to be considered on their own individual financial merits.  At the same time the finance and credit industry is increasing the degree to which it assesses and prices their services based on their customer’s latest management accounts. This is a real win win for everyone concerned and is key to getting the economy out of recession and growing again.”

For businesses submitting their latest financial information through CreditPal and updating their credit rating with Coface, there will be valuable business benefits:

Coface in the UK and Ireland, one of the leading credit insurance companies, together with CreditPal, a service provided by Future Route, and Graydon a major UK credit referencing agency, are  working together to facilitate the posting of management accounts in order to improve trading on credit amongst UK businesses.

 Businesses can access this service through www.cofaceuk.com and go to the Transparency/CreditPal page.