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Tuesday, October 5, 1999 Published at 18:20 GMT 19:20 UK

Business: The Company File

Rail shares drop after disaster

An injured passenger is carried away from the wreckage

Shares in rail operator Railtrack dropped sharply after the fatal train crash near Paddington station in west London.

London Train Crash
The tragedy happened shortly after 0800 in London (0700 GMT) and a major rescue operation was mounted.

By 0915 (0815 GMT), shares in Railtrack were down 4% to 1280p, making it the largest decliner in the FTSE-100 index of blue chips.

[ image: Rescuers worked to free trapped passengers]
Rescuers worked to free trapped passengers
Traders said it was a usual reaction for Railtrack shares to drop on news of a train accident, as the company owns and operates the UK's rail infrastructure.

The accident involved a crowded commuter train - a high-speed Cheltenham-to-Paddington Great Western service - and a Thames Trains service from Paddington to Bedwyn in Wiltshire.

Shares in FirstGroup, which has the Great Western Trains franchise, fell 3.54% from 311p to 300p. It was the largest fall in the FTSE 250 index.

And the Go Ahead Group, which includes Thames Trains in its stable of companies, fell 12.5p to 842.5p.

By the end of the day, Railtrack shares were down 12p at 1319p and FirstGroup shares remained down 11p. Go Ahead also remained down, by 12.5p.

Large losses

The markdown in the value of shares of the companies involved in the crash partly reflects the fact that there is likely to be widespread disruption to services for some time to come.

This will mean they lose ticket sales from cancelled services and may also have to compensate passengers who have already paid for journeys, such as those with season tickets.

There is also the bill for the damaged trains themselves, and the track.

The question of liability for the accident is unlikely to be known for some time to come, but there is likely to be a large compensation claim, and possible legal action.

Great Western Trains was fined a record £1.5m for the 1997 Southall crash, which killed seven people.

Some market watchers say the accident will come as a blow to Railtrack, as it had just started to regain investors' confidence.

Shares in the company had risen more than 4% since Thursday following a spate of recommendation upgrades after a company meeting with analysts.

Commerzbank said on Friday it was upgrading its Railtrack recommendation from "sell" to "hold". Analyst Wyn Ellis said the company had recently been making efforts to ensure it was maintaining its network in an "effective, constructive and efficient manner".

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05 Oct 99†|†UK
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