It has always been known that trade credit is the largest form of short term capital. The difficulty is to get hold of accurate estimates of the total amount of trade credit extended annually.
According to a report “Charting the Trade Credit Gap”, by Professor Nick Wilson of the Credit Management Research Centre at Leeds University and Taulia, the credit research group, UK suppliers extended £327bn in trade credit to their customers. This is approximately 20% larger than banks.
Jon Keating, European managing director at Taulia opines that “We believe this is a serious threat to the UK economy. Trade credit is being used as a blunt instrument by many companies, with outdated practices poorly adapted to today’s new economic environment.”
Credit management and credit information suppliers may be take exception to such statement. Credit management tools are quite advanced, transparency is better than in other countries thanks to a good public sector information infrastructure, credit information is reliable and in good supply. If one wants to lay off risk there is amply supply of credit insurance. Source: Financial Times
