BusinessCorporate FinanceWhitehall backs demands for ‘sensitive’ accounts

Whitehall backs demands for 'sensitive' accounts

The chancellor’s announcement to provide more trade credit insurance to companies will reinforce the controversial demands of insurers to be supplied with highly sensitive management accounts

whitehall

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that had seen their trade credit cover withdrawn or cut.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withdrawn cover from suppliers to frozen food company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.’

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