BP market plunge wipes billions off UK pension funds as shares in oil giant suffer fresh falls

Billions wiped off the value of UK pension funds

BP's market value down 17% at one point



Company to promise shareholder dividend



BP shares suffered fresh falls today as the beleaguered company battled to shut down its massive oil leak in the Gulf of Mexico.



The oil giant's market value was down another 3 per cent in early trading amid mounting speculation about its future.

Its share price fell to 417.10p, a new low after huge losses yesterday saw it plunge 17 per cent when the London markets opened after the holiday weekend.



Although the price recovered in the afternoon, £12billion was wiped off the value of its shares.



Billions of pounds have also been wiped off the value of pension funds due to the extraordinary decline of one of Britain's biggest companies.

BP is a key stock for many UK pension fund investments and its share fall will inevitably leave Britain's pensioners poorer.

Alan Smith, pensions expert and chief executive of financial planning firm Capital Asset, said as well as being a disaster for BP it was also a disaster for pensioners.

'Most pension funds will undoubtedly have exposure to BP an will be affected by this,' he said.

'If the company were to halve in value this could lead to pension values going down by one or two per cent.



'Pretty much every pension fund in the country owns a bit of BP and it has now fallen some £45billion in value.'



He also warned that the funds would sink even further as the markets continued to struggle.

Desperate: Technicians using a robotic saw on the Deepwater Horizon oil leak

The share collapse means a £15,000-a-year pension will be cut by up to £400 a year with possibly worse to come.



Despite the plunge in BP's value, the company is still expected to promise shareholders their annual dividend will be maintained. Last year the company paid out more than £10billion.

Last night the White House said the British company is big enough to survive the financial cost of the spill, even as shares plunged.

One analyst claimed the British company had 'the smell of death'.

But, asked during a news briefing if the Obama administration was concerned BP could be financially ruined due to the oil spill, White House spokesman Robert Gibbs said it was big enough to absorb the expense.

"You've got a company with the type of market capitalization that can and will fully pay for the damage caused by the disaster they are responsible for," he said.



The news came as the U.S. government launched a criminal probe into the oil spill. Federal agencies, including the FBI, are participating in the probe and 'if we find evidence of illegal behaviour, we will be forceful in our response', U.S. Attorney General Eric Holder said.



US President Barack Obama said that if laws had been broken, those responsible would be brought to justice.



BP will begin a new and risky plan to funnel oil from the well to the surface today.

Robots will begin cutting through the top of the well's lower marine riser package, and it could take up to 72 hours to get the containment device operational.

Yesterday's results meant the company's stock has fallen £42billion - more than a third of its value - since the fatal oilrig explosion six weeks ago.



Barrier: BP contract workers lay down an absorbent boom to clean up the marsh west of Lake Felicity near Cocodrie, Louisiana

Threat: Louisiana National Guardsmen put together a Tiger Dam to protect Grand Isle from encroaching oil coming in with the high tide

With no end to the environmental nightmare in sight, some analysts are predicting BP may not survive.

'This situation has now gone far beyond concerns of BP's chief executive being fired, or shareholder dividend payouts being cut - it's got the real smell of death,' said Dougie Youngson, oil analyst at Arbuthnot Securities, a London-based investment banking firm. 'The key question is now "can BP survive?"

'We are very negative on the prospects for BP and this situation has a real possibility breaking the company.



'Given the collapse in the share price and the potential for it to fall further, we expect it could become a takeover target - particularly if its operating position in the U.S. becomes untenable.'



The blue chip heavyweight's decline dragged the wider market down in London, with the FTSE 100 falling 108.7 points to 5079.7.

BP boss Tony Hayward has vowed to clean up 'every drop' of oil. But the calamity has cost the company up to £700million and the eventual bill is expected to top £15billion if the leak continues into August as expected.

The London-based firm has received 30,000 insurance claims and made 15,000 payouts totalling £30million.

After abandoning the doomed top kill plan at the weekend, BP engineers were working yesterday on a new 'cut and cap' operation to siphon some of the 800,000 gallons of oil a day gushing from the undersea well up to tankers on the surface.

The initial step to sever the ruptured pipeline was expected to go ahead late last night or this morning to make it easier for a snug-fitting cap to be fitted over it.

Remote-controlled robots were being used to carry out the tricky operation.

But the White House has warned that if this latest venture fails, it could result in boosting the flow of crude by 20 per cent by removing resistance the pinched pipe may have created.

The one solution that seems likely to work - drilling relief wells to intercept the oil below the damaged well - won't be completed for two months.

About 120 miles of Louisiana coastline have been contaminated by slicks and tar balls and a quarter of fishing areas have been closed off.



With hurricane season about to hit the region, residents fear the oil could be washed inland.

President Obama yesterday vowed again that BP would pay the financial bill for the 'greatest environmental disaster of its kind in our history'.



Damage: A map from the National Oceanic and Atmospheric Administration shows the size of the spill. Darker areas represent a thicker concentration of oil in the water



