Hedge funds were sitting on double-digit returns from shorting UK banks yesterday, with US manager John Paulson the richest among them, with positions becoming even more profitable this morning after a UK government plan to bail out the banking sector sent the FTSE down a further 5.2%.

Between September 19 and yesterday about £26.8bn (€34.4bn) had been wiped from the value of the 14 UK financial companies that were named by hedge funds forced to disclose their short positions in their stock on September 19.