The French government is aiming to boost the country's business by offering firms credit insurance in a bid to safeguard dwindling credit lines.

The channel's problems with credit insurance have been well-documented this year. All three of the UK's major credit insurers Coface, Atradius and Euler Hermes have scaled back cover on channel firms. Companies affected including distributor Bell Micro and electrical retail giant DSGi.

The struggle to secure credit has blighted thousands of businesses up and down the UK this year. The latest big name casualties of the credit crunch are high street perennial Woolworths and furniture chain MFI. Both firms have suffered from a lack of credit in recent months and succumbed to entering administration this week.

Finance minister Christine Lagarde met commerce and insurance leaders yesterday. She announced plans for insurer Caisse Centrale de Reassurance, which is publicly owned, to provide businesses with cover when private insurance is withdrawn.

Lagarde told a news conference: "The state is intervening by giving its support, given the current worsening in risks that will create particular difficulties for some companies."

The measure will take effect next month for an initial period of six months and is designed to protect the supply of credit available to French firms. The country's construction industry is expected to welcome the move with open arms as a raft of delays and cancellations to construction projects have put thousands of jobs in jeopardy. Foreign counterparts may react less favourably as the move appears to offer French firms a natural advantage.