Sir Philip Green, owner of BHS and Topshop, is in talks about buying Icelandic group Baugur’s network of shops, which includes House of Fraser, Hamley’s and Karen Millen.

Baugur has suffered a collapse in confidence from credit insurers and suppliers in the wake of the Icelandic meltdown. Sir Philip, who has avoided equity markets and kept his assets in safer havens, could emerge from the UK economic slowdown by clinching one of the country’s most important retail deals this decade.