Cameron pledges legislation to deal with terror threat – but how will the ‘severe’ rating affect markets?

Prime Minister David Cameron has given a speech outlining new legislation to make it harder for Brits to travel to Syria and Iraq to fight alongside Islamic State (IS). 

 

The press conference followed home secretary Theresa May's announcement that the UK's terror threat level had increased to “severe” – the second highest rating possible – saying an attack on home soil was “highly likely”. 

 

Cameron said he would detail the plan in full to Parliament on Monday, but hinted at measures to prevent people travelling, including new legislation “that will make it easier to take people's passports away”.

 

There will also be an increased presence of armed police.  

 

This afternoon the FTSE100 dipped slightly after a positive start to the day, closing 0.2 per lower. 

 

But looking back at the last few threat alerts we can see there probably isn't too much for investors to worry about: the more terror threats (and attacks) there have been, the more resilient markets have become.

 

This is what the FTSE did back in August 2006, when terror threats were published for the first time following a thwarted transatlantic attack, when 24 people were arrested in London:

 

In 2007, the markets actually rose after the threat level was raised to critical:

Here's how things looked in 2010, the last time the alert was raised to severe:

Attacks have had a greater impact on markets, but perhaps not as much as you might expect. 

 

In 2001 the 9/11 attacks in the US, in which nearly 3,000 people died, did hit markets hard:

In London 2005, we were faced with our own terror attack, which killed 52 people. As you can see from the chart, the FTSE 100 dropped initially, but rebounded pretty quickly:

And in 2008, 12 synchronised attacks took place across Mumbai in which more than 600 people died – but there was relatively little impact on the FTSE 100: