London financial district jittery after terror scare

There was a jittery reaction to yesterday's thwarted bomb plot in the City of London, where leading UK shares had a rollercoaster day.

The FTSE 100 plunged by more than 100 points at one point but clawed back some of its initial losses to close 37.1 points lower at 5,823.4.

Airline stocks and companies linked to the tourism industry were the hardest hit as investors fretted that holidaymakers and businessmen would put travel plans on hold.

Richard Lambert, head of the Confederation of British Industry, warned there could "clearly be some economic impact".

Mr Lambert, who helped the Bank of England to set interest rates before joining the business lobby group, said firms dependent on exporting goods or on international staff travel were most at risk.

Grant Thornton, the business consultants, estimated the possible cost to the UK economy could be "at least" £10m per day through lost productivity from City workers stuck in long security queues or other delays.

"This figure will rise dramatically due to lost tourism revenue as incoming flights are cancelled and as a result of the expected downturn in foreign visitors," Maurice Fitzpatrick, one of its business analysts, said.

The renewed terror threat compounds the qualms that have knocked global stockmarkets sideways in recent months given concerns about interest rates, record oil prices and slowing economic growth in the US.

Shares in British Airways plummeted by 5 per cent to 370.25p, while Ryanair fell 11 cents to 7.44 euros.

Hotel stocks also suffered with InterContinental off 3.1 per cent.

Shares in the tour operators First Choice and MyTravel also closed lower.

Not all City analysts were worried about the lasting impact of the attack plot, pointing out that travel restrictions were likely to be temporary.

Bradley Mitchell, a fund manager at RLAM, said that while companies had been "living under the terrorist shadow since 9/11...the British consumer has had a long experience of living with terrorist threats and have proved to be a very resilient bunch".

Wall Street shrugged off the impact of the attack plot, managing a modest rise in early trading.

Even the price of gold, which normally rises on any sign of unease because it is regarded as a safe haven by investors, fell.

Analysts said the decline reflected relief that governments had demonstrated their power to protect their citizens.

- INDEPENDENT