Whitehall backs demands for 'sensitive' accounts

The government’s efforts to provide more trade credit insurance will reinforce the controversial demands of insurers to be supplied with highly sensitive management accounts instead of relying on statutory filings at Companies House.

Alistair Darling announced in the Budget a £5bn war-chest to aid businesses that had seen their trade credit cover withdrawn or cut.

Last week Accountancy Age revealed the world’s biggest insurer Euler Hermes had withdrawn cover from suppliers to frozen food company McCain because it had refused to provide management accounts when asked.

But the chancellor’s announcement means companies can now expect the government to bolster demands for accounts that would otherwise not be made available and would normally only be used for internal purposes.

‘Whatever accounts the industry uses to get their impression of a company, that’s what we’ll be using,’ said a DBERR spokeswoman.

After the collapse of Bay Trading last week, one credit referencing agency boss said government backing credit insurers on management accounts could be the prelude to more collapses.

‘If insurers pull cover because they don’t get management accounts this could lead to suppliers in a jittery market saying “what do they know that we don’t”, and taking action,’ said Martin Williams of Graydon.

Matthew Fell, the CBI’s director of company affairs, said companies were getting ‘more and more onerous information requests including management accounts’.

‘But the flipside of this is for listed companies disclosing sensitive information. The ABI’s Statement of Principles [providing a framework for trade credit insurers and their customers] is entirely sensible, but what interests us is the need for sensitivity and confidentiality,’ he said.

From May 1 until December 31 this year, businesses can apply for six months’ ‘top-up’ insurance from the government if credit is reduced by Euler Hermes, Atradius or Coface – the UK’s three biggest credit insurers.

The ABI, which represents companies providing 94% of domestic insurance services sold in the UK, said companies would have to comply if they wanted the cover.

‘The focus for any risk-assessment is to reflect the current trading position and be forward looking, so companies will need to provide management accounts and financial projections rather than relying on the most recent set of filed financial accounts, which could be both historic and reflect a vastly different trading environment.’

McCain filed its accounts at the end of last week revealing a pre-tax profit of £36.1m, up 56% on the previous year. Euler Hermes has yet to say whether it will reinstate insurance to its suppliers. ‘There are more and more cases like McCain’s,’ added Williams.

After the Budget, Fabrice Desnos, chief executive of Euler Hermes, said. ‘Through this top-up scheme, the government is effectively endorsing our risk management decisions.’