Talks between tanker drivers and those who employ them are to be resumed today in an effort to prevent another strike taking place next weekend.

The strike – by 640 drivers employed by hauliers supplying more than 900 Shell garages - ends at 6am on Tuesday. Petrol retailers say there is enough fuel in the pumps to outlast the action.

After eleventh-hour talks broke down last Thursday night, the situation appeared deadlocked, but the re-opening of talks over the pay-dispute is encouraging.

Bernie Holloway of Hoyer UK, the largest of Shell’s suppliers, said: “We are pleased that this step forward has been made and will make every effort to draw these talks to a successful conclusion.”

John Hutton, business secretary, praised UK motorists: “Although the strike has inconvenienced motorists, they have shown commendable common sense and restraint which has minimised its harmful impacts.”

The Petrol Retailers Association had earlier said that most forecourts remained open over the weekend and that they should have enough fuel to last out the final day of the strike, which ends at 6am Tuesday.

Shell claims only 8 percent of their 8,838 petrol stations across the UK had been affected “by shortages of one or more of fuel grades”. The company did warn motorists that “with another day of strike still to come, it is inevitable that in time we will continue to see more difficulties with supply”.

The drivers union Unite has rejected a pay offer of 7.3 percent this year and 6 percent next year which would raise the 640 drivers’ average annual earnings to “around £41,500”.

Unite is demanding a 13 percent rise this year, and claims Shell is to blame for holding down contract prices and curbing pay rates for drivers because the company outsourced transport in the 1990s.

Unite joint general secretary Tony Woodley, said Hoyer and Suckling did not have the money to settle the union claim because Shell was being “greedy”. He said tankers were the equivalent of “mobile bombs” and drivers deserved higher pay.

Hoyer insists its pay rates are competitive. It says drivers have had rises of 27 per cent over the past four years – twice the rate of inflation.

Today marks the start of a strike by tanker drivers who deliver fuel to Royal Dutch Shell petrol stations in the UK, after last-ditch talks over a pay dispute disintegrated last night.

The drivers, who rejected last-minute pleas from Prime Minister Gordon Brown to call off the action, have halted the supply of fuel to about 1000 Shell garages – which is around 10 percent of the UK’s 9,500 petrol stations.

Shell garages will run out of fuel “almost immediately” according to Len McClusky, the assistant general secretary of Unite, the drivers union, adding that all of the oil companies’ forecourts will be affected within 24 hours.

The union decided to strike would take place after they rejected a 7.3 percent wage rise this year, from the haulage companies Hoyer UK and Suckling Transport, the sole suppliers to Shell garages.

To try to appease the drivers, a second offer of a 7.3 percent rise followed by a 6 percent increase next year was offered, which would increase annual average earnings “to around £41,500”, but it was also rejected by the union.

Unite now plans to picket oil terminals, including Ellesmere Port on Merseyside and Grangemouth in Central Scotland, to prevent supplies getting through to Shell garages.

The Petrol Retailers Association has appealed to the public to avoid panic buying, which could make the situation worse, and say that there is sufficient fuel at rival garages to supply motorists. They also noted that Shell would have had enough time to ensure their own storage bunkers were as full as possible.

The industry is privately irritated at the intervention of the prime minister, who they believe has encouraged panic buying by exaggerating the threat to supplies.

Mr Brown, speaking at his regular press conference in Downing Street, refused to rule out calling in the army to keep fuel flowing. He warned that the government was willing to do “everything we can” to ensure petrol pumps don’t run dry. 

Bernie Holloway, a company spokesman, said: “We offered a substantial amount to the drivers. We extended our offer to the very limits that our business could sustain. We are disappointed that our improved offers have been rejected. Unfortunately, it looks likely now that there will be a damaging and costly strike.”

Unite, who were hoping for a 13 percent wage increase this year, claim that drivers’ pay had effectively stagnated since Shell outsourced its delivery operations in the 1990s. Unite also claimed that provision had “been made for fire, police and the emergency services”.

Mr McCluskey said: “Shell’s failure to intervene in this dispute means that Shell’s drivers have no alternative other than to go ahead with strike action, beginning on Friday June 13th 2008.

“This dispute could have been resolved if Shell had advanced a fraction of the billions of pounds in profit they make every month.”

For the fourth consecutive month the number of people claiming unemployment benefit has risen, providing further evidence that the stuttering economy has begun to affect the jobs market.

According to figures published by the Office for National Statistics, the claimant count rose by 9,000 to 819,300 last month. The last time the figures rose for four months running was two years ago.

Total unemployment has also risen for the second consecutive month from 38,000 to 1.64m during the three months to the end of April, marking the highest level for more than a year.

David Kern, economic adviser to the British Chambers of Commerce, said that the figures conveyed “serious warnings that the economic outlook is worsening”.

He added: “Given the expected slowdown in economic growth, it seems very likely that unemployment will increase further over the next year … Against this background, expectations in some quarters that UK interest rates will have to go up soon are unjustified.”

The number of people in employment rose by 76,000 to a record high of 29.55m. Stephen Timms, employment minister, said that this showed there are still “plenty of jobs available for people looking for work”.

However, Geoffrey Dicks, chief economist at the Royal Bank of Scotland said the rise in jobs was not enough to provide work for all the increased number of people entering the country.

Nigel Meager, director of the Institute for Employment Studies, added: “Fears that the current economic instability could cause a downturn in the labour market are now beginning to be realised. In the wake of high- profile job losses in the finance and construction sectors … [the figures also revealed] sharp reductions in vacancies in some sectors, such as manufacturing, hospitality and finance.”

Statistics from the British Retail Consortium earlier this week raised the prospect that retail workers could well “be the next to join the dole queue”, Mr Meager said

John Philpott, chief economist at the Chartered Institute of Personnel and Development, said however that the fact employers were still actively employing staff, and there was no sign of redundancies indicated that the job market was “cooling only moderately”.

Mr Philpott said that the finance and business services sector remained “in the eye of the storm, shedding 20,000 jobs in the first quarter of this year … But shops, hotels and restaurants are suffering too and are now in a period of jobs standstill.”

As the City bonus season came to an end the annual rise in average earnings including bonuses dipped by 0.2 percentage points to 3.8 per cent during the three months to April.

The increase in average earnings excluding bonuses was only 0.1 percentage points higher, at 3.9 percent.

Sir Fred Goodwin, Royal Bank of Scotland kingpin warned today that the turmoil in the credit markets is likely to continue for at least another year, and said the Bank’s “risk appetite is tempered”.

Discussing an “adjustment” in financial markets, Sir Fred said: “It is difficult to see it would take less than 12 months to work its way through.”

He added that “there’s clearly more bad news than good news, there’s almost exclusively bad news, but I don’t think we’re looking at the end of the world.” He saw “chinks of light” in some areas of capital markets and repeatedly reiterated that the bank “remains very much open for business”.

Sir Fred’s comments came as RBS, which raised £12bn from the biggest ever rights issue earlier this week, reassured investors in a trading update that its performance and writedowns on risky assets remain in line with previous guidance. RBS said in April that it expects a hit of £5.9bn before tax from its credit market exposures this year.

Banking shares rose on the news and were the top performers on the FTSE 100 in early trading as traders were relieved that there had not been a further deterioration in the RBS loan book. The bank’s shares climbed 4.75p to 238.5p but were down later, by 3p to 230.25p. HBOS was up 4.5p to 296.5p and Lloyds TSB rose 3.75p to 355.25p.

“The coming months I look to with caution but with a degree of optimism. It’s ’steady as she goes’ at this point. The business continues to perform satisfactorily on an underlying basis. There is business to be done and we’re doing it,” Sir Fred said, while acknowledging that the credit crunch is holding back the performance of many of RBS’s businesses.

ABN Amro, the Dutch bank acquired by RBS last year, is performing better than expected in terms of revenues and costs, it said.

Sir Fred said the bank is confident of selling its insurance arm for the price it had in mind at the start of the auction despite continued market turbulence. The operations, which include Direct Line and Churchill, were put up for sale in April with an expected price tag of up to £7bn.

“There are a number of people who would all ostensibly be good owners and capable of paying the price that we’re looking for,” he said. “We had a price in our minds that we were looking for at the start of the process and that hasn’t changed. We’re determined not to sell this for an undervalue, but at this point that doesn’t look like an option that’s going to come to pass.”

Sir Fred refused to give a forecast for UK house prices falls in the coming months but said it would “not be nearly as bad as in the US”.

Commenting on the £12bn rights issue, Sir Fred said “It was a good opportunity to be interacting with our shareholders but it won’t go down as an enjoyable experience,” referring to the “gyrations” which he said weren’t surprising given the size of the cash call and the “very exceptional market circumstances”.

Britain could start running out of fuel this weekend. The threat of a four-day strike by tanker drivers has caused ministers to activate emergency procedures with the oil industry.

John Hutton, business secretary, has ordered officials to draw up contingency plans because of fears the strike could prompt much more widespread fuel shortages than those caused by the strike at Grangemouth oil refinery in April. Industry executives believe these fears are well founded, and said they were working with the government to implement measures to minimise disruption.

The emergency measures were discreetly activated last Friday so as to reduce the risk of panic buying, and would safeguard fuel for emergency services and provide for supplies to be moved around the country to areas of shortages.

After their claim for a 13 percent pay rise was rejected, around 500 drivers employed by Hoyer UK and Suckling Transport is threatening to strike for four days from Friday.

The two companies are sole suppliers to almost 1,000 Shell forecourts, which are concentrated in the south-east, the north-west, central Scotland and parts of the midlands.

Mr Hutton fears that striking drivers could picket distribution depots used by other companies, leading to wider disruption.

“It is difficult to gauge what the impact of the strike would be if it went ahead,” the Department for Business said. “Shell accounts for about one in 10 filling stations and it is inevitable there would be some stock-outs.

“If the strike were to affect other retailers, it would have a more significant impact. The government is working with the wider fuel industry on what could be done to reduce any disruption to the public and business.”

Shell said on Monday night: “We are doing everything we can to avoid and minimise the impact of Unite’s industrial action.”

Mr Hutton is hoping that union and employers can resolve their differences at Acas, the conciliation and advisory service, when they meet for talks later this week. He says he accepts the need to strike a balance between preparing for fuel shortages and causing public panic.

The emergency measures include a suspension of anti-cartel rules to allow oil companies to exchange information about stocks.

The current driver salary sits at around £36,000 with the haulage companies offering to raise it by 6.5 percent. Hoyer says it is “disappointed” by the reaction of Unite, the drivers’ union. It says it has increased pay by 27 percent in the past four years.

The union, however, blames Shell for putting pressure on hauliers to keep wages down. It says the average salary of £36,000 includes a lot of overtime.

Royal Bank of Scotland announced today that 95.11 percent of the shares offered in its £12bn rights issue had been taken up by investors. Nearly 300m shares left with the underwriters – Goldman Sachs, Merrill Lynch and UBS – was to be placed during the day.

This was the largest rights issue seen in European markets. Its success followed an upturn in the bank’s share price last week, which at the start of the week had fallen to 220p, dangerously close to the 200p price for the shares offered to investors on an 11 for 18 basis. The shares had recovered to 259p on Thursday, ahead of the rights deadline on Friday. The shares fell by 5 percent to 245½p on Friday.

The relatively high level of acceptances could help sentiment towards HBOS’s £4bn rights issue. It s offering shares at 275p and on Friday its shares closed at 330¾p, barely above its 12 month low.

RBS who, jointly with Santadar of Spain and Fortis of Belgium, succeeded in winning a €71bn battle to buy Dutch lender ABN Amro last year, is due to announce a trading update on Wednesday ahead of the end of the first half of its financial year.

However, last week when Bradford & Bingley issued its profit warning and restructured its rights issue, RBS announced that the trading guidance it had given at the time of the rights issue in late April was still appropriate for the group and its divisions.

Investors are presently awaiting news on RBS’s plans to make disposals, notably of its insurance business. RBS recently agreed to sell its 50 percent stake in Tesco Personal Finance to the supermarket group for £1bn.

Investors are also heaping pressure on Sir Tom McKillop, chairman, after unhappiness with the group’s performance. They regard the banks determination, despite market conditions, to win ABN Amro as having necessitated the rights issue, which was accompanied by heavy write-downs on the value of complex debt securities.

In an effort to ensure there is no repeat of the Northern Rock fiasco, the Bank of England will have to draft in a panel of eminent City figures to ensure it is more alert to looming financial trouble, revealed chancellor Alistair Darling on yesterday.

Mt Darling has instructed City insiders to sit on the shoulder of the Bank’s governor Mervyn King, as part of an overhaul designed to put financial stability “right at the front” of its operations.

It is expected that, while Mr King may not welcome such oversight, there were signs that it could be a quid pro quo for him winning a related tussle with the treasury over the choice of a new deputy governor for monetary policy to replace Rachel Lomax.

Mr King has argued strongly that she should be replaced by Charles Bean, the Banks chief economist, on the grounds he needs a deputy with a strong monetary policy background to lead the fight against inflation. Mindful of the Banks weakness on financial stability issues, some Treasury officials have been promoting the claim of Paul Tucker, the head of markets.

Although Mr Darling has made it a priority to boost the Banks financial stability expertise, Treasury officials said the now expect the chancellor to back Mr Bean for the job. For this to be acceptable, the chancellor will demand that the bank accepts more external advice on city issues and formal oversight of its decisions on financial stability.

This reflects a considerable departure from the Treasury’s initially limited plans for reform of the Banks role in financial stability, set out in January.

Mr Darling told the Commons on Thursday “we should learn from the example of the monetary policy committee”, where outside experts were drawn in to help in making interest rate decisions.

He said there should be “a similar approach in relation to financial stability so that we can bring in outside expertise to advise the governor and of course the appropriate deputy governor”.

This reflects the Treasury view that the Bank is underpowered in the financial stability area; however Mr Darling’s team denies this because, after Gordon Browns shake up in 1997, much of the expertise in that area was transferred to the FSA.

The full details of the new system have not yet been finalised, though Treasury and Bank officials said the new financial stability advisers would not acquire the decision-making powers of the MPC.

“It would not be a hard operational role, it might involve scrutinising decisions but potentially it’s more than that,” said one Darling ally.

At this point it is unclear how the Treasury intend to find panel members who were both credible yet had no conflicts of interest.

Mr Darling’s aides say giving the Banks enhanced City expertise would not mean he is ditching his plan to give the FSA controversial new powers to intervene in failing banks, which is the centrepiece of new banking legislation.

The bank is concerned however, that it will have responsibility to foster financial stability but few powers. Mr King has proposed having the power to intervene progressively in the supervision of banks as their financial positions weaken.

Brussels has expressed its reservations about the restructuring package put forward by the government to save troubled mortgage lender Northern Rock, including fears that state aid is likely to drag on for too long.

The mortgage lender adopted a business plan allowing it to pay off a £26bn Bank of England loan within three years. It was also ordered to halve its mortgage book by encouraging borrowers to switch to other lenders.

The bank has a three-year guarantee that any savings deposited with it will be backed by the government.

The European Commission’s first assessment of the plan, set out in the European Unions official journal, sys it “doubts whether the size and duration of this down-sizing are sufficient to avoid undue distortions…[or] that… a deeper and more rapid downsizing could not be implemented”.

The regulator has particular concerns that the restructuring plan may run for an unnecessarily long period, that the state aid could have been more limited and that more could be done to compensate rivals over distortions to competition.

Lawyers have said that the commission could order the aid to be repaid if it was found to have been given illegally, but the decision on the rescue would be made in the second half of this year.

The chancellor Alistair Darling is said to be “pretty relaxed” about the commission’s assessment of the rescue plan. How relaxed he will remain is debatable as the EU journal does set out significant concerns about its compatibility with EU state aid rules.

Mr Darling’s officials were quick to maintain that the assessment came as no surprise and was simply part of a standard Brussels procedure when launching a state aid enquiry.

The proposed rescue operation was discussed at every stage with Neelie Kroes, the competition commissioner, and her officials before it was put into action insist the Treasury. Northern Rock was taken into state ownership in February.

Publication in the Official List formally triggers a month-long period in which business rivals and other interested parties can submit comments on the restructuring deal to the commission, although some views may have already gone in.

On Wednesday, the Organisation for Economic Cooperation and Development said that a fall in of around 10 per cent by the end of 2009 will slow Britain’s growth rate significantly and make the economy more vulnerable than most to the global credit crisis.

The organisation expects the economy to grow by 1.8 percent in 2008 and 1.4 percent in 2009, a projection that falls in line with the Bank of England’s latest central forecasts, but far more pessimistic than the Treasury.

The OECD continues to support the Bank’s generalised strategy of allowing the economy to suffer a protracted slowdown to squeeze inflation out of the system and advised the bank to keep interest rates on hold for the remainder of 2008.

However, it disagrees strongly the Bank of England on the effect of house prices on the economic outlook. The OECD believes that the UK is one economy apart from the US where a large fall in house prices would severely curtail economic growth.

OECD’s acting chief economist, Jørgen Elmeskov, said that the OECD had looked very closely at the underlying forces influencing consumptions and always found house prices and mortgage equity withdrawal to be significant.

“This could just be a coincident, but at the end of the day there have been too many such coincidences,” Mr Elmeskov said.

The OECD expects the economy to recover more slowly than the bank in 2009, and believe this creates the need for three interest rate cuts next year once it is clear that inflation is falling and that economic activity has slowed appreciably.

The OECD said the projected weakness in the economy also put the government’s fiscal rules in jeopardy. It forecasts in the twice-yearly Economic Outlook suggest that the government’s sustainable investment rule could be breached in 2009.

The organisation puts the blame for the weakness in the budget firmly at the government’s door. . “While ongoing economic weakness in 2009 would argue against fiscal restraint, the government’s options have been limited by excessively loose fiscal policy in past years when economic growth was strong,” it said.

Royal Bank of Scotland and Barclays London offices have been raided by the Office of Fair Trading, seizing documents and phone records, in the latest example of the competition watchdog’s hard-line approach to possible price-fixing.

The documents were taken as part of an investigation in to alleged anti-competitive behaviour over the pricing of loans to professional services firms, people involved in the probe said.

The probe was said to have been triggered by Barclays and comes amid high-profile investigations into price-fixing allegations involving supermarkets, consumer goods companies and tobacco groups. The OFT has confirmed they are in the early stages of the investigation and have a “narrow focus” into allegations of anti-competitive conduct in the financial sector.

RBS confirmed that its office at 280 Bishopgate had been raided and that it was fully co-operating with the authorities. Neither bank would comment, however, on the scale or scope of the material seized by the watchdog.

Barclays claim that members of its professional services team had been approached from outside the bank “in a manner which we regard as inappropriate”. The bank reported the incident on March 17, applying for leniency under rules that allow whistle-blowing companies to escape fines potentially amounting to as much of a tenth of global sales.

Barclays said: “The [OFT] investigation is operating within the confines of the professional services banking area and we believe that, if there is any issue, it starts and stops there.”

The OFT, in the past, used a more aggressive approach to tackling price-fixing, imposing heavier fines and using tough legal powers that allow it to target executives with the threat of up to five years in jail.

Only last year British Airways were fined a record £121.5m by the OFT for fixing the prices of passenger fuel surcharges. BA’s co-conspirator, Virgin Atlantic, applied for leniency and escaped a fine.

Banks are under increasing pressure from competition authorities in areas such as overdraft fees. The competition Commission is expected to publish a report later this week that will accuse leading banks of profiteering in the provision of loan insurance.