City reacts to Libyan freeze

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Libya's sovereign wealth fund, the Libyan Investment Authority, owns 24.4 million Pearson shares - equivalent to 3% or £240 million.

The LIA also holds a small stake in Royal Bank of Scotland and Italian bank Unicredit.

All UK assets controlled by Libyan leader Colonel Gaddafi and his relatives were ordered to be frozen by the Treasury last night.

Scardino revealed that she was still in discussions with the Treasury, but said: "Clearly the Libyan Investment Authority is a state asset. It is hoped that those assets - when they are unfrozen - are better deployed. We've made pretty clear we are uncomfortable about that investment. But we are a public company and we don't choose our shareholders."

The LIA sovereign wealth fund bought its stake in Pearson last year.

Under last night's freezing order, any company which holds assets suspected or confirmed to be connected to senior figures in the Gaddafi regime, must ensure that the funds cannot be moved or accessed.

Experts said in Pearson's case, that is likely to be the job of its brokers.

The Treasury said: "The order... applies to banks, financial institutions, charitable organisations and non-governmental organisations in the UK or established under UK law."

A Treasury spokesman added financial institutions are well aware of procedures under the financial sanctions regime in place since 1946.