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Obama and Cameron back BP
As the oil spill in the Gulf of Mexico has more than halved the price of BP shares and forced the company to suspend dividends until at least the end of the year, there have been fears that BP will never recover from the disaster.
Now both Barack Obama and David Cameron, speaking at the G20 summit, have said that it would be advantageous for BP to remain a strong and stable company.
Prior to the spill, BP made up seven percent of the FTSE All Share Index and contributed 15 percent of Britain's dividend income. With many pensions, investments and child trust funds holding BP shares due to its reputation as a good dividend payer, what are the risks for investors?
According to the National Association of Pension Funds (NAPF), BP shares make up 1.5 percent of the total assets of UK pension funds, worth more than £800 billion. This means people on defined contribution and defined benefit schemes will see a drop in the value of their pension.
However, as pensions are long-term investments, and the effect will be diluted by the other investments in the funds, the loss should be relatively small for most.
Many of BP's larger shareholders, including Legal & General, M&G, Scottish Widows and AXA, have already reduced their holdings in the oil company, while hedge funds such as GLG and BlackRock are backing a BP recovery and buying an increased stake in it.
