Rolls Royce leads blue chips plunge as sterling falls

Engine maker Rolls-Royce has posted the biggest loss in its history after it slumped into the red by £4.64 billion after being hit by the pound's plunge and a corruption scandal. The blue chip giant said the mammoth pre-tax loss for 2016 came after it was forced to make a £4.4bn write-down from the collapse of the pound since the Brexit vote, as well as its £671 million penalty to settle bribery allegations PICTURE: Rolls Royce/PA
Ben Woods

LONDON'S top-flight index slipped into the red as shares in Rolls-Royce plunged after the embattled engine maker reported one of the biggest losses in UK corporate history.

The blue chip giant slumped into the red with a pre-tax loss of £4.64 billion for 2016 after a £4.4bn writedown caused by the collapse of the pound since the Brexit vote, as well as a £671 million penalty to settle bribery allegations.

Investors took flight, causing shares to drop more than 4 per cent or 29.5p to 710.5p, with the FTSE 100 Index slipping 10.36 points to 7,268.56.

The huge annual loss follows a tough past two years for Rolls after a string of profit warnings and last month's settlement in a case brought by the Serious Fraud Office and authorities in the US and Brazil.

Across Europe, Germany's Dax was marginally down, while the Cac 40 in France rose 0.2 per cent.

On the currency markets, sterling took a tumble after the latest inflation figures for January came in shy of economists' expectations.

The Office for National Statistics (ONS) said the Consumer Price Index (CPI) measure of inflation hit 1.8 per cent last month, up from 1.6 per cent in December, marking its highest level since June 2014.

The main driver behind January's jump came from transport prices, which dropped by less than the amount a year ago, falling by 0.6 per cent between December and January, compared with a 2.5 per cent drop the year before.

Overall food prices were also flat between December and January after falling 0.6 per cent a year ago, as the sharp drop in grocery costs, triggered in part by the supermarket price war, ground to a halt.

The pound was down 0.6 per cent against the US dollar at 1.245 and 0.3 per cent lower versus the euro at 1.178.

The price of oil was up 0.4 per cent to US$55.79 a barrel, but saw gains trimmed after rising US shale output overshadowed Opec's efforts to slash global production.

In UK stocks, Thomson owner TUI was in the ascendancy after investors cheered results showing narrowing losses in the first quarter.

It said its net loss for the period came in at €81.6m (£69m), an improvement compared to last year's €138.7m (£117m).

Tui said its Northern region division – which includes Britain, Ireland, the Nordics, Canada and Russia – benefited from a "strong trading performance in source market UK & Ireland, with volumes up more than 10 per cent year-on-year".

Shares were up more than 5 per cent, or 61p to 1,218p.

The biggest risers on the FTSE 100 Index were TUI up 61p to 1,218p, Royal Bank of Scotland up 6.4p to 241p, Capita up 13.5p to 527p, International Consolidated Airlines Group (IAG) up 8.7p to 503p.

The biggest fallers on the FTSE 100 Index were Rolls Royce Holdings down 29.5p to 710.5p, Reckitt Benckiser down 149p to 6,926p, CRH down 52p to 2,733p, BAE Systems down 10.5p to 605.5p.


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