Arriva price hit by franchise defeat

AFTER an extremely volatile day of trading, the London market closed in negative territory once again, with the FTSE 100 Index sliding 75 points and finishing on 6143.

AFTER an extremely volatile day of trading, the London market closed in negative territory once again, with the FTSE 100 Index sliding 75 points and finishing on 6143.

Arriva, the European bus and rail operator, lost out to National Express in the battle for the UK’s East Coast Main Line railway between Scotland and London.

The line, previously franchised to GNER, attracted much interest when the company could no longer afford the payments and the remaining lease period became subject to offers. The defeat comes only weeks after Arriva beat off competition for the Cross-country rail franchise but National Express’s pledge to pay the Government £1.4bn over the seven-year period of the deal exceeded that of all other suitors. Shares in the company closed down by 25p at 759p.

Northern Rock, whose shares have suffered over recent months, experienced another turbulent day on the market reaching a midday high of 758p before closing down at 726p. The share price has struggled to make any headway since its profits warning in May and this together with higher interest rates and the knock on effect of the subprime mortgage fiasco in the US has severely depressed the share price.

Today’s inflation report released by the Bank of England, indicating that inflation has fallen back down to the 2% mark, could boost confidence in the company and other mortgage lenders; however this is unlikely to become apparent until fears of another interest rate hike recede.

One of the stronger performers in the regional portfolio and also in the FSTE 100 was Scottish and Newcastle, whose shares rose 1.3% to 580p, on the back of the ever familiar bid speculation surrounding the company. The most recent rumour to hit the market is that a bid in the region of 700p per share may emerge; however, there has been no comment from the company.

Anna McKechnie Trainee Investment Adviser Wise Speke

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