Sony slams govt’s credit crisis scheme

Sony slams govt’s credit crisis scheme

Sony has fired criticisms at a new government initiative which aims to help businesses cope with credit problems.

In a contentious budget report last week, Chancellor of the Exchequer Alistair Darling unveiled a credit insurance scheme which aims to support businesses if their credit insurance cover is reduced.

Sony’s UK managing director Steve Dowdle, however, said the policy has “effectively signed the death warrant” for a number of retailers.

In January MCV reported that key credit insurers had cut cover on stock sold in to retailers. Outlets such as PC World, Dixons and Currys were said to be affected by the policy change. 

The extent of Woolworths’ troubles was made clear last year as the retailer was forced to pay in cash when buying stock from suppliers, with credit insurers refusing to cover any deals. That significant withdrawal helped trigger retailer’s sudden plunge into administration, and its eventual closure.

This is why Chancellor Alistair Darling has established a scheme where the state will provide cover if private insurers back away. A government spokesperson said the policy will provide a “lifeline” to firms in need.

Yet Dowdle, speaking to the BBC, has strongly criticised the policy, saying that the £1 million limit on the plan meant that retailers with 10 to 15 stores would not get help. He also slated Darling’s decision to offer cover for a maximum of 8 months, and excluding any businesses that have been hit by insurance withdrawals prior to April 1.

“This smacks of shutting the door after the horse has bolted, as so many businesses had their cover withdrawn before that date,” Mr Dowdle added.

The Department for Business, Enterprise and Regulatory Reform responded that the scheme was a “targeted, temporary measure to help companies secure the cash flow they need and restore confidence throughout supply chains”, adding that sharing risk between the sate and the private sector was a far balance without “taking excessive risks with taxpayers' money."

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Tags: Sony , credit insurance

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