Half of large retailers say the reduction or withdrawal of trade credit insurance has undermined their ability to trade.

According to the British Retail Consortium’s Credit Conditions Survey, 40 per cent of small and medium-sized retailers also say the reduction or withdrawal has undermined their position.

Two thirds of larger retailers believe trade credit insurers are not in a position to assess accurately the risk of a supplier not getting paid.

Trade credit insurance protects suppliers that sell goods on credit to companies, such as retailers, against the risk they will not get paid. The BRC said if credit insurance is withdrawn, suppliers demand to be paid upfront, leaving retailers short of stock, creating cash flow problems and costing jobs, as retailers seek to divert funds from wages to pay suppliers.

BRC director-general Stephen Robertson said: “For retailers to survive and keep people in work they need to keep shelves stocked with the goods customers want. In these uncertain times, it’s even more important suppliers have the confidence that trade credit insurance brings. Cover must remain available.

“We’re not expecting the tax payer to take on more risk than private insurers. But by matching the trade credit insurance that private insurers are willing to provide, the Government can help fundamentally sound businesses weather the recession at relatively little cost. Without this backing, the lack of trade credit insurance will threaten the viability of more suppliers and retailers.”

The survey found a third of small to medium-sized retailers had experienced a contraction in lending by their bank. Of those, 89 per cent said it had affected their businesses, 75 per cent had cut stocks and 30 per cent had cut employment.

Ahead of next week’s Budget, the BRC is calling on the Government to provide top-up insurance cover up to the level that private insurers are prepared to provide.

Robertson said: “UK retailing employs more people than the whole of manufacturing and is every bit as deserving of support. We’re not asking for handouts but for those retailers that need it, a safety net which underpins trade credit arrangements is essential.”