Thursday evening business bulletin

Jun 19 2008 By Andrew Mernin

A rare dose of good news from the high street failed to cheer investors today as more housing market woes dragged the London market into the red.

Britain’s biggest mortgage lender Halifax Bank of Scotland revealed £1bn in writedowns and predicted a 9% fall in house prices, causing misery for rival lenders and housebuilders.

Gains for miners on higher metal prices helped limit the damage to the FTSE 100 Index, but it ended 48.5 points lower at 5708.4.

The close is the lowest since the end of March, as a poor start on Wall Street added to the downward momentum for London’s top flight shares.

HBOS’s trading update - which came as the firm looks to gain investor backing for its £4 billion rights issue - rattled already frayed nerves in the banking sector, with news of higher bad debts to come on a worsening outlook for house prices.

Struggling sofa retailer Land of Leather said a £15m share issue unveiled today was needed to keep the business from going under.

The Kent-based firm said it has agreed to sell 29.9 million new shares for 50p each, ``without which the company is unlikely to be able to continue to trade". It will bring in £13.5m after expenses.

Land of Leather has seen sales plummet after the credit crunch and housing market slowdown curbed demand for ``big ticket" purchases.

The firm, which has 108 sites, today revealed that trade had worsened further this year, with like-for-like sales down 35% during the six weeks to June 6. This compares with a fall of 20.7% in the nine months to April 27.

Its share issue, which is subject to shareholders’ approval, will follow a consolidation of 10 old shares into one new share. It means the 50p new share issue price effectively represents a 48% discount to yesterday’s closing price of 9.7p.

Chancellor Alastair Darling’s week of economic woe continued today after official figures showed a bigger-than-expected jump in public borrowing during May.

Net borrowing stood at £11bn - a record for the month and more than expected by City economists - in a sign of the worsening public finances, the Office for National Statistics figures showed.

This followed an inflation surge to 3.3% in May, forcing an explanatory letter from the Bank of England to Mr Darling on Tuesday.

Today’s report also added £2.3bn to the April figures. This leaves net borrowing at £12.7bn so far in the current financial year - £4.4bn ahead of the previous year.

The ONS figures showed growth in current Government spending running ahead of tax receipts, adding to the pressure on the public finances. Spending was £1.5bn higher than a year ago, compared to a £1bn rise in receipts.

The pound at 5pm was US$1.9729 compared to US$1.9567 at the previous close while the euro at 5pm was £0.7856  compared to £0.7923 at the previous close.