Goldney: Government must find debt solution
For the past week, Unitas Wholesale members have been digging deep to tackle the many and varied issues facing them during the ongoing coronavirus crisis.
While the bounce in retail is still being felt, it has posed challenges around stock, supply and staffing. There have been plenty of resources produced to support customers who in turn support communities, such as social distancing retail kits and home delivery set-up support.
Meanwhile, our 70-plus on-trade and foodservice members are feeling differing and more extreme pressures. Some are facing complete demand stoppage and temporary shut down, while others are approaching the even more difficult challenge of having a trickle of demand from vulnerable customers such as care homes and hospitals etc but still having a cost base that needs all the sales in order to be financially viable. Bad debt issues have also mounted with customers cancelling direct debits as their businesses are forced to close, plus the issue of perishable stock.
Against this backdrop, there has also been amazing innovation. Business-to-consumer business have emerged overnight, wholesalers are exchanging resources at pace, and suppliers, while protecting their own interests, have stepped up to try and release cash flow and extend credit.
The government has certainly acted with massive investment due to flow into the wholesalers’ customer base and a glint of light on furlough investment, but it is crucial that the government understands the theory does not match the practical reality.
Collectively, we must work on ensuring a government-backed scheme to ensure the grant system is used to pay wholesaler credit or the government must support the bad debt.
The interest-free loans, at the time of writing, still appear inaccessible to wholesalers who, for generations, have worked to create an asset value that may preclude these loans and force a situation where they can borrow but at commercial rate and with no guarantee of debts to them being paid in the future. Some might argue this is a disgrace. Some may argue it’s a lack of understanding, but either way, it’s a heart-wrenching situation.
The overall solution may be complicated by so many differing circumstances and voices, but the fundamental core is simple. Government must back its theory that small business can keep going and debt will be paid by the billions it is flooding in to them. If not, then underwrite it. Why should wholesalers or suppliers have to otherwise?
If government underwrite the debts, suppliers can therefore extend credit in confidence, knowing they can see the route to being ‘whole’ too. In the meantime, supply parity with the multiples on SKU availability and substitutions is critical for UK wholesalers to help keep the UK fed.coronavirus covid-19 Foodservice retail Unitas wholesale