Jessops was forced to reassure the City that it had not broken its banking covenants as shares in the photography chain fell by up to 39 per cent.

A spokeswoman for the group, which closed more than 80 high street stores and cut 550 jobs two months ago, insisted that Jessops was not in difficulty with its lenders.

She said that the share price plunge may have been triggered by an undisclosed investor selling 600,000 shares in the business: “Jessops has definitely not breached its banking covenants and there has been no material change in trading.”

By the end of trading yesterday, shares in Jessops stood at 11½p, compared with the 155p at which the company was launched on to the market by the private equity arm of ABN Amro three years ago.

Jessops agreed a £66.5 million facility with HSBC in June and analysts said that this should be enough to withstand a further down-turn in trading over the summer.

Richard Ratner, an analyst at Sey-mour Pierce, said Jessops had confirmed in June that it would have cash to cover eventualities even if summer trading was poor: “Trading would have had to have been mega-dire for them to breach their covenants.”

Jessops, founded 70 years ago, has been hit hard by the rise of cheap inter-net-based electrical retailers, as well as the encroachment of supermarkets and high street general stores such as Argos into the market for cheap compact cameras.

The increasing inclusion of high-spec cameras within mobile phones has also hit the digital compact market.

Two months ago, David Adams, Jessops’ chairman, said that the combination of problems was a “perfect storm” as he announced the closure of a quarter of the group’s stores in the UK.

Mr Adams also said at the time that he was “delighted” with the progress made in developing a new strategy: “It allows us to reposition Jessops as a true multi-channel retailer, building on our core strengths in the digital imaging marketplace.”

The company has hired Accenture, the consultancy, to help to develop a new plan for the business, and brought in the restructuring specialist Gordon Brothers to help to clear £15 million worth of stock from stores.

In June the camera retailer reported pretax losses of £25.2 million for the 26 weeks to April 1. It also warned of further problems as like-for-like sales plummeted 12.9 per cent in the 12 weeks to June 17 when Jessops suffered shortages of important products.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive