Coface, one of the big three insurers of trade credit, has withdrawn cover for suppliers to several Baugur-owned British high street companies as concerns over the situation in Iceland and the health of the UK high street hit the company.

Atradius, another credit insurer, has said it is talking to Baugur about each of its companies. Ian Hollyhomes, Coface credit insurance director, said: “We have reviewed parts of Baugur Group and have decided to withdraw or reduce cover in some instances.”

The company's decision was motivated by the slowdown on the UK high street as well as the crisis in Iceland. The Icelandic group owns British high street stores including House of Fraser, Warehouse, Hamleys and Iceland.

Baugur said yesterday: “In response to developments in the Icelandic banking sector, we would like to make clear this will have no impact on Baugur's operations or portfolio companies.

“In the individual cases where Icelandic banks may have to sell shareholdings in our portfolio companies, we would like to emphasise that these are all minority shareholdings. Should an Icelandic bank sell all or part of its minority shareholding, there would be no impact on the operations and performance of the companies, but would change only the ownership structure.”

Suppliers are free to keep selling goods to retailers without credit insurance, but usually make a decision on whether to continue within days of notification that they will not be covered. Typically, the supplier will be covered against the retailer being unable to pay it for up to three or six months. The big three credit insurers, Coface, Euler Hermes and Atradius, have said that they will not cover suppliers to Woolworths. Coface also said it would not cover suppliers to JJB Sports.

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