Fears grow for future of Woolworths

Two of the UK's biggest credit insurers, Euler Hermes and Atradius, have stopped providing new cover for firms supplying Woolworths and cancelled some existing policies linked to the company.

Ahead of the store's announcement of half-year earnings on Wednesday, expected to show heavy losses, confidence in its long-term viability seems to have hit a new low.

"There are no new lines opening on Woolworths and some policies have been cancelled or adjusted," said a source. "It really doesn't look good for them."

Trade credit insurance covers businesses against the risk of bad debt due to the insolvency or protracted default of their buyers. Earlier in the summer credit insurers reduced cover for suppliers dealing with the Woolworths Entertainment subsidiary. In recent weeks they have further cut their exposure.

The news comes as Woolworths is expected to reveal half-year losses of around £10m, although some estimates suggest it could be as high as £30m. Last week chairman Richard North and new chief executive Steve Johnson met with Malcolm Walker, the Iceland founder, to discuss the £50m offer made by Mr Walker. It is believed that negotiations are continuing.

"It's looking increasingly bleak," said an analyst. "Woolworths is heading towards administration very quickly."

Earlier this month the IoS revealed that Ardeshir Naghshineh, Woolworths' biggest shareholder, was backing the turnaround plans of the current management, urging other investors to ignore Mr Walker's offer. Woolworths' shares closed on Friday at 7.56p – up 0.4 per cent.