Tuesday lunchtime business bulletin

Oct 7 2008 By Karen Dent

Shares in major UK banks plunged today after it was reported leading players from the sector held talks over a plan for the Treasury to offer a multi-billion pound injection of capital.

The speculation rocked the likes of Royal Bank of Scotland and HBOS amid ongoing worries about the pair’s funding positions.

The FTSE 100 Index was down 4.8 points at 4584.4 after opening more than 2% higher as investors eyed cheap looking stocks following the global stock market panic that wiped £93bn from London’s leading shares yesterday.

Royal Bank of Scotland, which is seen as being among the most vulnerable to a European banking meltdown, slumped another 25% or 36.5 points to 111.6p.

It declined to comment on the reports today. Shares fell 20% yesterday and were down by as much as 40% earlier.

British Airways is planning to close its Glasgow cabin crew base, putting almost 140 jobs under threat, it was revealed today.

Staff at the base operate on the airline’s services between Glasgow, Edinburgh and Heathrow.

The news came ahead of a meeting later today between BA chief executive Willie Walsh and Scottish First Minister Alex Salmond.

It is understood there will be no compulsory redundancies but sources said 138 jobs would be affected.

The planned closure will not affect flight services to and from Scotland, it is understood.

Output in the UK manufacturing sector fell for the sixth consecutive month in August to record its longest period of decline for 28 years, official figures showed today.

The Office for National Statistics (ONS) said manufacturing output dropped 0.4% during the month, double the 0.2% drop expected by analysts. The last time output fell for six months in a row was between July and December 1980.

Falling production of transport equipment such as motor vehicles was the main drag on industry between July and August, the ONS said, down 2.3% during the month.

Data yesterday showed sales of new cars plunged by 21.2% last month, the worst performance since 1991. Paul Dales, at Capital Economics, said August’s manufacturing contraction, which was 1.9% lower than a year ago, meant the sector was on course to shrink by 1.1% between July and September and "provided further evidence that the UK probably entered a recession in the third quarter".

The pound at midday was US$1.7424 compared to US$1.7389 at the previous close, while the euro at midday was £0.7781 compared to £0.7774 at the previous close.