Corus has become the first leading UK industrial company to find itself caught by the reduction of cover to its suppliers by one of the world’s largest credit insurers.
Euler Hermes said it was reducing the amount of cover it was willing to write for suppliers of the country’s largest steelmaker as a result of a fall in global demand for steel. This cover is written against the risk of Corus not paying its bills.
Euler Hermes said: “We have reduced our exposure following the well-documented reduction in needs due to reduced activity levels and a collapse in prices. This has been happening across the whole sector.”
The reduction of the credit cover on Corus, will mean that some suppliers will be unable to arrange any cover at all on the steel giant.
Whilst this is the first report we have seen in the national press about credit insurance, we have been aware for some time that steel suppliers generally have been having difficulty arranging credit insurance to cover their sales. Insurance was withdrawn at the beginning of the year for three of the largest automotive manufacturers, and successively for many of their suppliers.
For some years now many steel stockholders and service centres would not offer credit to companies on whom they could not arrange insurance. Most however now find themselves in the situation where if they only deal with companies they can insure, then they no longer have a business.
It's another case of the financial sector raising barriers to business.