UPBEAT comments on the probable impact of EU sugar reforms eased concerns that sugar companies could expect a slump in profits, giving UK-based producers a boost.

Associated British Foods (ABF), owner of British Sugar, and Tate & Lyle, which sells sugar under its own brand, were both beneficiaries of Südzucker’s assertion that it can hold its profits steady despite reducing support from the EU.

The German sugar group, one of Europe’s largest producers, said late on Wednesday that increased profits in its sugar unit would offset lower prices. It said the net impact of the EU intervention would not be negative.

Under current proposals, put forward last year, production quotas would be reduced and subsidised exports effectively eliminated. The European Commission proposes that support prices for sugar be cut by a third. Earlier this month the World Trade Organisation ruled that the EU’s sugar exports were illegally subsidised.

Traders fear that ABF, which made a quarter of its profits from sugar in the first half of this financial year, is liable to see sugar-related profits slide considerably when the reforms are introduced next year. But Südzucker’s comments bolstered sentiment in the City’s dealing rooms yesterday, helping the shares up 28p to 798p. Tate & Lyle, which will be less affected by the reforms, was also in favour, 11½p higher at 471½p.

The FTSE 100 index made it back above the 5,000 level for the first time in nearly three months, but gave up those early gains to end 23.4 points up at 4,994.9.

The benchmark index was kept under the cosh by a slump in banking stocks as Barclays cautioned that consumer bad debts were rising faster than expected. Barclays headed the large-cap fallers, 22p lower at 528p. The news also dragged rivals lower, with Royal Bank of Scotland off 53p at £16.06, Northern Rock down 18½p at 745p and HBOS off 19½p at 806½p. Lloyds TSB ended down 8p at 458p while Alliance & Leicester lost 9½p to 852½p.

The risers board was headed by Whitbread, up 75p at 925p, amid continued speculation that private equity firms could be set to make a move for the leisure group.

GUS edged 4½p lower to 854½p as analysts at Panmure Gordon reduced its target price on the retail to services group, which this week announced plans to demerge its Burberry stake, from £10.54 to £10. The broker said that the trimming of its forecasts was largely related to the company’s sale of its 50 per cent stake in Lewis, the South African retailer, earlier this month.

• NEW YORK: Shares had a fillip from a gross domestic report showing an increased rate of growth in the US economy. The Dow Jones industrial average closed up 33.90 points at 10,537.60.

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