Insurers pull plug on PowerHouse

THE electrical group PowerHouse Retail is fighting for its life after key insurers withdrew cover for some of its suppliers.

The company, which has 3,300 staff, is in urgent discussions with its bankers. Its board has lodged a petition to put it into administration, a move that would freeze its debts, 'as a protective measure', but it has not yet gone into administration.

PowerHouse, the third-largest electricals retailer after Dixons and Comet, said the insurance setback 'had come completely out of the blue'.

Last year, it notched up sales of £319m from more than 230 stores after the acquisition of 98 Scottish Power retail outlets. It reported a rise in pre-tax profits from £2.5m to £6m.

Recently, it said it was reviewing the future of almost one quarter of these stores, amid signs that trading has been tough.

Despite booming demand for electrical goods, the sector has been a graveyard for smaller retailers who lack buying power. In 2001, Tempo went bust.

PowerHouse chairman and chief executive Derrick Broomfield said: 'The trade insurers of some of our suppliers have re-assessed their view of the risk profile of their client's industry.'

The insurers, who give suppliers a guarantee that PowerHouse will pay its bills, apparently got the jitters about its finances.

Last night's talks are aimed at finding an emergency solution that secures the supply of goods to the stores.

Broomfield said: 'After seven years of successful and profitable trading, we are doing all we can to find a solution to this situation and to keep the business trading.'

There are four main insurers for electrical goods wholesalers. They offer suppliers a safety net on payment because there is often a long time lag between orders and final payment.