The action seeks compensation for what the companies say is a discriminatory tax that has forced them to close stores and cut jobs.

Government budget changes in 1996 saw many retailers forced to charge 17.5% insurance premiums tax on warranties and insurance policies attached to items ranging from electrical goods to travel packages.

Granada and Thorn claim that this has unfairly limited their competitiveness as insurance brokers arranging similar cover are only required to charge 4% in tax.

Travel agents and tour operators also faced competition from brokers charging 4% on insurance policies until mid 1998, when the tax rate on such policies was made uniform at 17.5%.

Tax said to cost 520 jobs at Radio Rentals

Thorn UK, which runs Radio Rentals, said the tax law had resulted in it closing 90 stores with the loss of 520 jobs. Granada said it had closed 100 stores with the loss of hundreds of jobs.

Granada said in a statement: "We believe that this is anti-competitive. We have taken this action in the interests of our shareholders and customers."

The companies also claim the tax violates European Union legislation banning value added tax on insurance for electrical goods.

The selling of this type of insurance cover is highly lucrative for both travel and electrical retailers. In some cases, they earn more revenue from it than on the sale of the goods and services themselves.