The Times reports that Poundland is struggling to keep its shelves stocked due to supplier concerns over the retailer’s financial health. Images of empty shelves are a stark reminder of how quickly insolvency risk can ripple through a supply chain. In the aftermath of the discount chain's sale to Gordon Brothers last month for £1, suppliers are reportedly tightening credit terms and shortening payment deadlines. A proposed restructuring plan, which will involve rent reductions and the closure of 68 stores, is likely to have caused further supplier concern around the future of the business.

The response of trade suppliers highlights the precarious position in which they can find themselves when a major customer teeters on the edge. Suppliers are often encouraged to extend trade credit to retailers, which effectively increases their exposure as unsecured creditors. When confidence falters, they may seek to reduce exposure by demanding cash on delivery or ceasing supply. But these decisions are rarely straightforward. Long-term contracts, minimum supply obligations, and commercial relationships all complicate the picture. Many suppliers rely on trade credit insurance to mitigate the risk of non-payment, but insurers themselves may withdraw cover if they assess the buyer’s financial position as deteriorating. Once one insurer pulls out, others often follow, and suppliers may be left with little choice but to stop trading.

Legally, the situation is further complicated by the restrictions on “ipso facto” clauses introduced by the Corporate Insolvency and Governance Act 2020. This legislation introduced restrictions on terminating contracts for insolvency-related reasons. Suppliers can no longer rely on a contractual right to terminate solely because a customer enters administration or another insolvency process. They must obtain consent from the insolvency officeholder or the court. This is designed to support business rescue efforts, but it can leave suppliers exposed.

In this environment, suppliers must be proactive. Monitoring the financial health of key customers, reviewing contractual terms, and engaging early with legal advisors are all essential steps. Where possible, seeking additional security or guarantees can provide a buffer. But ultimately, the Poundland case is a reminder that insolvency risk is not just a problem for the distressed company - it’s a systemic issue that can destabilise entire supply chains.

Poundland struggles to fill shelves as suppliers spooked by sale