Financial Services Secretary Lord Myners has rejected a call for action on retailers’ credit insurance difficulties but will monitor developments.

Lord Myners, a former chairman of Marks & Spencer, made his comments in a letter to Austin Mitchell MP, who had asked for Government intervention in the insurance industry, as was the case with banks, in order to “save the high street”.

In his letter, dated the day after the collapse of Woolworths, which was partly precipitated by credit insurance difficulties, Lord Myners replied: “You say that without insurance, suppliers are unable to supply and this will cause disaster in the high streets. However, it is necessary to see this issue in its full context.

"The market as a whole does not rely on trade credit insurance. In fact, the penetration rate is only around 20 per cent and even for those who do buy the product, only part of the risk is covered by the credit insurance, so it is still not in the interests of the supplier to deal with a company that fails.”

Myners said his officials are working closely with relevant bodies, including the Association of British Insurers, to “assess developments in this area”.

The cutting of supplier credit insurance has affected a large number of retailers, including electricals group DSGi and fashion firm Mosaic. The most notable example was Woolworths, which was last week was placed in administration.

In his original letter, predating Woolworths’ collapse, Mitchell had warned of the dangers the insurance situation was creating.

He wrote: “If this continues someone is going to go under. Suppliers or traders or both. If the firm going under is a biggie like Woolworths this will knock big holes in every high street across Britain and it’s difficult to see those holes being filled in the next disastrous year.”