UK-based suppliers fear being wiped out as retailers are extending payment terms and cancelling orders. As the UK Fashion and Textile Association revealed, retailers are extending payment terms from 60 to 120 or even 150 days. Suppliers to New Look, a fashion chain with more than 400 stores in the UK, last week received a letter informing them that they would not be paid for orders in production. The firm has temporarily postponed outstanding supplier payments until the Paragon Clothing, which designs, sources and supplies fabrics and clothes for fashion retailers, is also witnessing effective cancellation of an entire season.

Retail chains including Next, have suspended all operations. Arcadia, the fashion empire controlled by Philip Green and his family, is likely to permanently close dozens more of its UK stores. Suppliers fear that financially distressed retailers could go out of business before invoices are settled, leaving them in a long queue of creditors.

Longer payment terms are also causing acute cash flow problems because many smaller suppliers are reporting delays in accessing the government’s coronavirus business interruption loan scheme. Parker Lane Group, which redistributes items that have not sold even after markdowns to regions such as eastern Europe and the Middle East, expects a sharp increase in unsold stock.