MARKET REPORT: Stocks fall over rail bailout

Transport groups started the week in reverse after the Government scrapped the rail franchising model which has been in place since the 1990s. 

Ministers have agreed to extend state support for railways after the pandemic virtually wiped out ticket revenues as workers were advised to stay at home. 

Govia Thameslink Railway and Southeastern operator Go-Ahead Group and Great Western Railway operator FirstGroup both said they had signed contracts with the Government to keep running services for the next six to 18 months. The emergency measures ensure that the companies’ losses will be covered by the taxpayer. 

But it also means they will make less money under the temporary contracts than other short-term deals struck earlier this year. And the end of the franchising model means the system will likely be less lucrative for them in future – with ministers mulling concessions-based systems under which train companies would be paid a fixed fee to run services. Go-Ahead shares fell 4.8 per cent, or 31.5p, to 620p, while FirstGroup dropped 12.2 per cent, or 5.22p, to 37.48p. 

But it was shares in Stagecoach, whose rail franchise contracts ran out last year, which fell the most – falling 17.7 per cent, or 7.84p, at 36.4p. 

Rolls-Royce shares dived 10.8 per cent, or 19.45p, to 160.7p to the lowest level since early 2004 after it confirmed weekend press reports that it is planning to raise £2.5billion. 

The company said it was considering whether to raise the money through a ‘variety of structures’, for example, selling new shares or other cash injections. 

This is more than had been rumoured, with the City previously expecting it to be around £2billion, and also said Singapore’s sovereign wealth fund could be included. Rolls, the jewel in Britain’s engineering crown, has been hammered during the Covid-19 crisis by the mass cancellations of flights – which have wiped out the income it makes from servicing jet engines. 

Around £52billion was wiped off the value of the FTSE100 in a dire day for stock markets, as Britain teetered on the brink of introducing tighter coronavirus restrictions. 

The Footsie fell 3.4 per cent, or 202.76 points, to 5804.29, with just four companies closing higher. 

Supermarkets were on the up – as they are likely to see a short spike in sales and would still see strong demand even in the event of a second nationwide lockdown. 

Tesco closed up 2.7 per cent, or 5.9p, to 225.5p, Morrisons rose 2.3 per cent, or 3.95p, to 178.2p, and Sainsbury’s advanced 0.9 per cent, or 1.75p, to 196.75p. Just Eat Takeaway climbed 1.4 per cent, or 116p, to 8544p, by the close. 

The FTSE 250, which is more exposed to events that happen in the UK and is the index on which many leisure firms are listed, fell 4 per cent, or 698.9 points, to 16870.78. 

Government contractor Babcock was among the day’s fallers – but it managed to pare back losses after a late announcement that boss David Lockwood bought nearly £100,000 worth of shares in the group. 

Lockwood, who was the head of Cobham, took over as Babcock’s chief executive in July. 

That month he bought around £300,000 worth of stock. 

Babcock’s shares fell by 6 per cent in early trading but finished the day down 1.3 per cent, or 2.8p, to 215p. 

Conference organiser Informa crashed to an £801m first-half loss after Covid cancelled or delayed the majority of its events. 

The world’s largest events group said local lockdowns, quarantine restrictions and rising infections had dashed its original hopes that business would pick up from September, which it said had ‘not been possible’ outside China. 

Shares in the group closed down 3.4 per cent, or 13p, to 367.6p.

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