Invoice insurance intermediary Nimbla estimates that invoices worth around £250m will remain unpaid following the collapse of retailer Arcadia Group.

Flemming Bengtsen, CEO at Nimbla, said the Coronavirus Business Interruption Loan Scheme and the Bounce Back Loan Scheme had given a lifeline to many SMEs, but had also created a wave of companies that were highly vulnerable.

He said: “Arcadia’s collapse highlights the danger of a domino effect as defaults on trade credit trigger others to fail. We estimate as much as £250m of unsecured debts will be left behind to Arcadia’s suppliers.”

“SMEs are in a precarious position; heavily leveraged and unable to withstand further stress to their business. They require their suppliers to offer credit terms as they cannot borrow more and in equal measure, they cannot afford for their debts to go unpaid. The average amount of bad debt SMEs said would tip them into insolvency was £30,000 before COVID-19.

“That number is undoubtedly much lower now. Arcadia sadly is just the tip of the iceberg as many more defaults can be expected in 2021.”

Bengtsen called upon the government to extend the Trade Credit Insurance Reinsurance Scheme until such time as the effects of the crisis and the stimulus have worked their way through the system.

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