Wednesday morning business bulletin

Jun 11 2008 By Andrew Mernin

Shares in struggling sofa chain ScS Upholstery tumbled by more than a third today after an insurer refused to cover five suppliers against the firm being unable to pay them.

The withdrawal of credit insurance for the firms - three of which are principal suppliers - comes amid increasing nervousness over the prospects for "big ticket" retailers in a cooling housing market.

Sunderland-based ScS said the unnamed insurer’s move had hit the short term finances of the suppliers involved.

The company said: "Following the publicised withdrawal or tightening of credit insurance terms for the furniture retail sector, the company has been notified that one company has withdrawn credit insurance for ScS, affecting the working capital facilities of some of our principal suppliers.

``ScS is in discussions with each of the suppliers affected and is continuing to trade with them in the normal course of business whilst various financing options are being reviewed."

Retail stocks felt more pain today after investment bank Citi issued sell notes on a number of firms in the sector.

Casualties included Next, which fell 2% in the FTSE 100 Index, while jeweller Signet and Comet owner Kesa Electricals were impacted in the second tier.

Housebuilders also continued to slide, but sentiment improved in the banking sector after Royal Bank of Scotland posted a solid trading update. The FTSE 100 Index ended the first hour of trading 15.1 points higher at 5842.4.

The biggest gain of the session came from Halifax Bank of Scotland as nerves ahead of its £4 billion rights issue were soothed by the RBS statement. Shares rallied 6.25p to 228p, while RBS added 0.75p to 234p and Lloyds TSB rose 3p to 354.5p.

Persimmon moved in the opposite direction, down 5% or 19.5p to 368p, after its closing price last night made it a certainty for relegation to the FTSE 250 Index. Investors also continued to fret following doom laden notes on the sector from Goldman Sachs and Dresdner Kleinwort.

Royal Bank of Scotland (RBS) today said it remained ``very much open for business" despite caution over a worsening economy and tough market conditions.

The owner of NatWest said trading in many of its businesses since the beginning of the year was ``good" although results were hampered by deteriorating credit markets.

But there was relief for investors after the bank revealed no further writedowns on investments hit by the credit crunch, which have totalled around £8.4bn so far.

Chief executive Sir Fred Goodwin said: "Whilst we remain very much open for business, our risk appetite is tempered by a cautious stance in relation to short term economic factors and market conditions."

This week RBS received backing from more than 95% of shareholders for a £12bn rights issue to shore up its finances following the write-downs and last year’s acquisition of Dutch bank ABN Amro.

The pound at 9am was US$1.9537 compared to US$1.9548 at the previous close while the euro at 9am was £0.7920 compared to £0.7915 at the previous close.

For more regional and national business news see nebusiness in The Journal and Evening Gazette.