Shares in Chaucer rose by more than 13 per cent yesterday as it emerged that the Lloyd’s of London insurer was in merger talks with Novae Group, an industry peer. The approach came after Chaucer said last week that it was exploring options for raising capital to take advantage of the improving underwriting outlook for the insurance sector and its capital requirements.

Novae, which approached Chaucer’s chairman in recent days about a possible deal, is proposing a merger on an all-share, nil-premium basis. Chaucer said that there could be no guarantee of an offer being made and added that it would continue to explore capital-raising options. An up-date is expected this week. Shares in Chaucer rose 5½p to 47p and Novae ended the day 6½p up at 326½p.

Ricardo, up 7¾p at 197¼p, and AEA Technology, unchanged at 18½p, received a boost after Royal Bank of Scotland said that the two environmental consultancies could be early beneficiaries of President Obama’s commitment to reduce carbon emissions. Richard Rae, an analyst, said that although it may be tempting to dismiss Mr Obama’s recent proposals as rhetoric, with no financial impact for many years, both groups should benefit from any spending, given their policy, development and technical skills.

Workspace fell 4½p to 28p after the group, which lets business space to smaller companies, proposed a £87.2 million rights issue to ease debt and bolster its balance sheet.

ATH Resources fell 12p to 51½p after it said that coal sales from its ATH Regeneration unit would be 75,000 tonnes lower than expected in 2009 after a local authority rejected its application to develop a regeneration scheme at Langton, Nottinghamshire.

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