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Last Updated: Thursday, 7 July, 2005, 13:23 GMT 14:23 UK
Blasts 'won't shake UK economy'
Stock trader
Markets saw a knee-jerk reaction
The economic impact and disruption of the explosions in London is likely to be minimal and brief, analysts said.

Despite a slump in share prices, oil costs and the pound, financial markets should recover once the threat has passed and extent of damage is clear.

The tourism industry may be hit as travellers cancel holidays to London amid concerns about their safety.

Demand should pick up again, however, as was seen following similar attacks in New York and Madrid, analysts said.

'Flight to safety'

Traders in the financial markets said that they reacted quickly to the news of the blast, selling shares in firms likely to be affected such as insurance companies and travel agents.

They also increased holdings of so-called safe haven products, such as gold and the Swiss franc.

People are becoming more resilient
Justin King, C2i

Any dip in the markets is likely to be corrected as investors reassess the situation.

"The market reaction has been immediate and what you're seeing is a flight to safety," said Anais Faraj, equities strategist at Nomura.

His view was backed up by David Franklin of Christows Stockbrokers.

"The important thing is to examine the markets, get a feel for the news flow and which markets and which stocks might be affected more than others and then take a rational decision later on in the day."

The effect on the economy will take longer to emerge, but should not be too severe, analysts said.

'Back to work'

Justin King is managing director of C2i, a firm that specialises in protecting organisations and their employees across the world.

The firm also worked with clients both before and after the bomb attacks in Madrid.

The main fact limiting the economic impact of the London blasts is that very little infrastructure has been damaged, Mr King said.

Companies should be able to get back to normal quickly, despite the disruptions experienced on Thursday.

"At the end of the day, it comes down to deniability of workforce, the fact that people can't get into work," the former military intelligence officer told BBC News.

"But people are becoming more resilient. You've got to get back on the tube. They've got to go back to work."

He said that while there may be a short-term unwillingness to use public transport, that should evaporate with time as confidence in the safety of the system returns.

Emergency plan

Since the September 11 attacks in New York, companies have been investing more heavily in continuity plans, which should mean they can absorb shocks and keep functioning.

Also, many of the firms in London are multinational and are able to shift their operations and production from one location to another quickly and seamlessly.

The economy and stock markets are likely to keep ticking over unless the blasts have "a very strong impact on consumer confidence", according to Mark Precious, co-head of global equity strategy at UBS.

"You would expect markets to recover from this," he said.


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