THE banking sector dragged the London market into the red yesterday after stress tests revealed the final bill for bailing out Ireland’s banks will be 70 billion euros (£61bn).

The banks – Allied Irish Banks, Bank of Ireland, Educational Building Society and the Irish Life & Permanent – need an extra 24 billion euros (£21.2bn) to survive the financial crisis.

The figures saw the FTSE 100 Index, which had managed to stay afloat for most of the session, close 39.5 points lower at 5908.5.

The decline was led by banks, which increased earlier losses following the announcement by the Central Bank in Dublin.

HSBC led falls, down 15p to 641p, while Barclays was down 6.2p to 277.5p.

Lloyds and Royal Bank of Scotland, which are both heavily exposed to the Irish economy, were down 0.4p at 58p and 0.3p at 40.79p respectively.

High inflation in the eurozone saw the single currency strengthen on the increased prospect of an interest rate rise at the European Central Bank.

Elsewhere, retailers suffered after babycare specialist Mothercare and furnishings-to-clothing group Laura Ashley were the latest store chains to reveal disappointing results.

The figures followed PC World and Currys parent Dixons Retail, which issued its second profit warning in as many months.

Mothercare fell ten per cent, down 42p to 400p, after it said UK sales remained in the red and revealed profit margins were taking a bigger-thanexpected hit.

Laura Ashley fell 15 per cent, a 4.2 per cent drop in recent UK like-for-like sales overshadowing a near-doubling in full-year profits.

Dixons dropped another eight per cent after its announcement that sales declines in the UK and Ireland worsened since Christmas.