The group is relying on price increases to improve margins.Shares were inevitably affected by yesterday's terrible events in central London, but even before news of the explosions broke, shares were down 4 per cent. Diageo is in the midst of a cost-saving programme, which has included moving production of Guinness back to Dublin, but more is needed to offset the volume decline.Spirits are still rising in popularity in the US, as appetite for beer declines in favour of cocktail drinking. But growth in volumes across the group has slowed during the second half of the year, and organic volumes for the year will be no better than last year. Even Diageo's powerhouse of brands is suffering in Europe, where it gets nearly a quarter of its profits.

Diageo thought about throwing in a spoiler bid itself, but settled in the end for a few of Pernod and Allied's cast-offs - Pernod's Bushmills whiskey brand and most of Allied's New Zealand wine portfolio. So with the last biggest consolidation opportunity for the drinks industry dried up, is there any way Diageo can start delivering growth to investors? A trading update yesterday did not immediately cause much fizz. Europe's economic slowdown is leading to consumers tightening their drinking belts, and sales are expected to be as flat this year as a month-old Smirnoff Ice.The rising number of smoking bans across Europe is also having an effect on sales. But snapping on its heels will soon be the French drinks giant Pernod Ricard, which recently got approval to swallow Allied Domecq in a £7.6bn takeover deal. And Eruma, a little company which makes bomb-proof blinds, which floated last week, jumped 0.75p to 7.75p..

Diageo has rested happily on its laurels of being the world's largest drinks company for some time, commanding leading market shares in most of the countries it operates with a cocktail of big-hitting brands including Smirnoff, Guinness, Baileys, Jose Curevo and Johnnie Walker. IG Group, the financial spread-betting firm which reported a busy day, was up 2.5p at 152p. Its shares are trading above the level of Shire's cash offer.There was an early sharp sell-off on Wall Street, which came on top of the previous day's oil price-related drop, but again most of the ground was quickly recovered. One dealer said the effect of the attacks had not been as pronounced on the US markets as London traders had expected earlier in the day. "The world has gone hard to this sort of thing, and the shock effect gets less," he said.There were even some traders looking, discreetly, for companies that may stand to win new business as a result of the attacks. Underground repair work was being added by some to this week's Olympics victory as a reason for buying Balfour Beatty, the engineering project expert, whose shares were up 1.75p to 349p. On Wednesday it rejected a takeover bid from CI Financial of Canada.