City Reaction: Markets fall in jittery response

The reaction in the City of London to yesterday's thwarted bomb plot was jittery, with leading UK shares having a rollercoaster day.

The FTSE 100 fell by more than 100 points but regained 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 that 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 would be the most at risk.

Grant Thornton, the business consultants, estimated the possible cost to the British economy in the short term could be "at least" £10m a day through lost productivity from City workers stuck in security queues or other hold-ups.

Shares in British Airways fell by 5 per cent to 370.25p, and the budget airline Ryanair fell 11 cents to €7.44. Hotel stocks also suffered, with InterContinental down by 3.1 per cent.