THE IRISH Exporters’ Association (IEA) has warned that a sharp reduction in credit insurance facilities has created severe cashflow management difficulties for its members.
IEA chief executive John Whelan said 74 exporting companies were declared insolvent last month.
He also predicted that “unless corrective action is taken quickly” there could be up to 900 insolvency cases by the end of the year.
“There is little alternative for many exporters in managing the cashflow requirements for their export orders as the banks have tightened the conditions to providing credit or guarantees to their clients, and securitisation of exporters’ receivables is critical to survival in the current economic environment,” Mr Whelan said.
He added that the drying up of credit insurance facilities had put some €9 billion worth of exports at risk.
“Credit insurers are responding to the higher international risk climate by reducing their exposure. In doing this they have reduced the insurance cover and cash flowing of overdue debtor payments,” he said.
“This, in turn, reduces the creditworthiness of the exporter in the eyes of his suppliers and bankers.”
According to Mr Whelan, the trend of cancelling or substantially reducing credit cover was a factor in liquidation. He said 753 exporting companies closed last year, 370 more than in 2007.
“We are looking at market failure on a massive scale,” said Mr Whelan.
“The export industry expects this company closure trend to accelerate as we proceed through 2009 . . . unless corrective action is taken quickly.”
Mr Whelan accused the Government of inaction on the issue. He said an IEA delegation met Minister for Enterprise, Trade and Employment Mary Coughlan last month and asked “the Government to jointly underwrite the export credit insurance schemes in existence in Ireland with the commercial underwriters to prevent major cashflow problems facing the export sector”.
A spokesman for Ms Coughlan said a team of experts would report to her on the matter at the end of the month.
“This is a very complex issue and it is important that we establish the facts of the matter before the State commits to bringing forward any proposals or initiatives in this area,” the spokesman said.
“It is important that in the current difficult financial environment that any State initiative would be designed to be self-financing and time limited, and also that there be a financial cap to limit the exposure of the State in the event of significant losses developing.”
He added that, when the Minister had received the report, she would discuss its finding with her Cabinet colleagues “as a matter of priority”.
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Colin Culliton, managing director of Dublin-based printing company, The Printed Image, which was founded in 1990.
"We're typical of a lot of Irish companies in that we do some export, and it was a growing part of our business that we would have liked to concentrate on with the Irish market contracting.
"The weakness of sterling has made it hard to compete in the UK but, when you manage to do a deal, you now come across difficulties with credit insurance.
"Last year our typical customer would have been covered no problem at all. We were picking up work in the UK and it was starting to be a sizeable part of our business. Now it's just not that way. It's a problem.
"The home market is a difficult market to sell into at the moment. If the export market closes off to people as well it will become very difficult.
"In the current climate, anything Government can do to help turnover levels in any Irish company could help employment.
"Credit insurance is an important part of doing business. If they can sort out the credit insurance issue it will be easier for people to export and trade their way out of this situation."
