Focus DIY chief’s fury over credit insurance withdrawal

THE boss of home improvements chain Focus DIY has called for a government investigation after credit insurers refused to cover 95% of suppliers to the Crewe company.

Bill Grimsey has written to business secretary Lord Mandelson, and all the other political parties, asking them to examine the practices used by the credit insurers who have withdrawn cover for suppliers to the 183-store business.

Withdrawal of credit insurance can hit a business hard – as it is forced to pay its suppliers up front – increasing pressure on cash flow. DIY chains are already having to cope with a slump in sales as fewer people move home due to the recession.

Mr Grimsey said Focus had persuaded many of its 300 suppliers to stick to the standard 67-day payment terms, and had been meeting many of them to discuss the issue.

He said: “I’m not getting anyone not co-operating, it’s just that it becomes hand-to-hand combat for a while.”

He said the credit insurers are “fair-weather friends” who don’t go into enough detail, make unilateral decisions with short notice, and jeopardise the futures of businesses.

Credit insurers sell insurance to suppliers against the risk that their customers go bust before being able to pay them for goods delivered.

However, as the prospects for the retail sector have darkened  the leading credit insurers have started to reduce or withdraw cover.

Focus, which has annual sales of about £450m and employs 4,900 people, is contending with a 10% drop in the DIY market.

The Cheshire company was bought by US private equity house Cerberus in June 2007 for just £1, but as part of the deal the new owner took on Focus’ £174m debt pile.