Prudential shares dropped 17.5p to 552.5p.The latest difficulties will raise further questions about the strength of insurers’ solvency, which has already taken a battering from two and a half years of negative markets and from a lull in consumer confidence.Prudential and rivals CGNU and Royal & SunAlliance attempted to calm fears about their solvency, saying the difficulties would not force them to sell equities to bolster reserves.. The pound fell below the psychological level of three old German marks yesterday, fuelling speculation the UK was edging closer to membership of the European single currency. Sterling hit 65.2p to the euro, equivalent to DM2.999, for the first time since October 1999. “We are now close to the rate that manufacturers would regard as competitive,” said Stephen Radley, chief economist at the Engineering Employers’ Federation. A survey last year of EEF members, which together account for almost a million workers, found they were looking for a rate of 67p to 70p, or DM2.80 to DM2.90.Economists said the pound had been falling for some weeks on the back of speculation over the Government’s plans for euro membership.

Adam Cole, at Cr?t Agricole Indosuez, said: “I think this is a euro convergence story. Investors have been putting a higher probability on euro membership.” But he warned the pound would “snap” higher again if the markets believed the Government, which must decide by next summer whether the economy has converged with Europe’s, is lukewarm on the issue. Mr Radley agreed, saying: “If the Government wants to give businesses support on this issue it has to take the lead.”. The controversial Wall Street analyst Jack Grubman, famous for his bullish view on the telecoms sector, was back under the spotlight yesterday in the wake of WorldCom’s accounting black hole. The shares peaked at $64 in June 1999 but have lost 94 per cent of their value this year before they were suspended at 83 cents on Nasdaq yesterday. Mr Grubman cut his recommendation on the stock to “neutral” on 11 June last year.But while share prices were riding high, Mr Grubman was a favourite in the investment community thanks to the close relations he enjoyed with the companies he researched.SSSB’s parent company, Citigroup, is WorldCom’s leading banker ­ a factor that led many to assume the group’s star analyst was particularly well informed.

He is also said to have been particularly tight with executives at the now-bankrupt Global Crossing and the troubled telecoms outfit Qwest.So close were those relations that Mr Grubman recommended the hiring of the former Global Crossing chief executive Robert Annunziata and helped negotiate merger deals, The Wall Street Journal reported.But in the wake of the collapse of share prices in the sector, his fall from grace has been swift. He downgraded another banking client, Level 3 Communications, to “neutral” from “buy” in June last year ­ again after that company’s shares had fallen dramatically.But the biggest blow for Mr Grubman came in April when, as part of an investigation into analysts’ stock-picking, the New York State Attorney General, Eliot Spitzer, issued a subpoena to SSSB asking for documents related to his research.The subpoena follows a civil suit filed against him in April by the New York attorney Jacob Zamansky, who won $400,000 from Merrill Lynch after claiming that his client lost money after advice from its star technology analyst, Henry Blodget.. Executives at WorldCom and City analysts were yesterday insisting there would be little short-term impact on telecoms services in the UK in the wake of the accounting irregularities uncovered at the US telecoms

Executives at WorldCom and City analysts were yesterday insisting there would be little short-term impact on telecoms services in the UK in the wake of the accounting irregularities uncovered at the US telecoms company.
WorldCom promised the UK watchdog Oftel that there would be “no immediate threat” to telecoms services in the UK. “They’re operating on a business as usual basis,” a spokesman for Oftel said.Nevertheless, he said executives from the company would be meeting with the regulator “in the next few days” to go over the potential impact in further detail.

“It’d be wrong for us to comment on what might occur if a, b or c happened,” he said.Meanwhile, WorldCom’s 4,000 staff in Britain, at its sites including Reading, Cambridge, Manchester, Leeds, Edinburgh, Bristol and London, were last night waiting to find out what would happen to their jobs after the US giant announced it would cut another 17,000 staff worldwide from this Friday.Although WorldCom does not have any debt repayments due in the next six months, analysts yesterday speculated that it was in technical default with its banks after it admitted it had improperly booked $3.8bn worth of expenses as investment. As a result it will restate its earnings for the past five quarters, wiping out its profits from the start of 2001. Even before Tuesday’s announcement, WorldCom had been trying to put together a $5bn secured credit facility to secure its long-term future.Financial analysts predicted that even if WorldCom were to go bankrupt, “the business would be kept alive until it was sold off”. Others predicted UK companies including BT and Colt Telecom might well be among those to benefit if customers start deserting the US carrier. “The good news if WorldCom goes bust is that BT will be a beneficiary and so will Colt,” Jim McCafferty, an analyst at SG Securities, said.