Qatar took a near-8 per cent stake in Britain's third-largest bank yesterday as it ploughed billions of pounds into UK companies.

Barclays said that the Qatar Investment Authority (QIA) would spend £1.7 billion on a maximum 7.7 per cent stake as part of the bank's £4.5 billion capital raising. As part of the same open offer, Challenger, an offshore vehicle set up by Qatar's Prime Minister to invest family wealth, will spend £533 million on a 2.3 per cent stake in Barclays.

Meanwhile, shares in J Sainsbury surged by more than 4 per cent after it emerged that the QIA had made its first stock purchase since its failed takeover bid for the supermarket group last November. The shares closed at 328p. The QIA bought seven million shares at an undisclosed price in a move that took the Qatari shareholding in Sainsbury's from 25 per cent to just under 25.3 per cent. The QIA is nursing an estimated loss of more than £1 billion on its original investment in Sainsbury.

At the same time the London Stock Exchange led the FTSE 100 risers on speculation that the QIA had increased its 15.1 per cent stake in the stock exchange operator. LSE shares made sharp gains in the afternoon on the talk and closed up more than 14 per cent at 952p.

In February the QIA, a sovereign wealth fund set up three years ago to invest profits made from the world's largest gasfield, said that it had $15 billion to spend on overseas financial institutions over the next two years. The £30 billion fund itself is expected to double in size by 2010.

John Varley, the chief executive of Barclays, welcomed Western investments by sovereign wealth funds. Under the terms of yesterday's deal, up to 24 per cent of Barclays will be owned by foreign funds, depending on the outcome of a clawback by existing investors. He said: “The participation of players such as these is one of the most positive manifestations of globalisation. It's highly positive that there are pools of money that can be put to work in this way. That's very different to the world of five or ten years ago.”

The fundraising is the culmination of months of talks with potential international investors.

Barclays will issue more than 1.5 billion new shares to raise the £4.5 billion needed to increase its capital ratios and win new business. Sumitomo Mitsui Banking Corporation (SMBC), the Japanese financial group, will spend £500 million on a guaranteed 2.1 per cent stake in the bank at 296p a share. The bank also signed a deal with SMBC to give Barclays better access to wealthy Japanese customers.

The remaining £4 billion will be raised from existing investors China Development Bank and Temasek, the Singaporean fund, and from the QIA and Challenger. These shares will be priced at 282p each and made available to existing shareholders at 3 new shares for 14 existing shares. CDB will keep its stake at 3.1 per cent, while Temasek's will rise from 2.1 per cent to a maximum 2.9 per cent.

Shareholders will have until July 17 to tender for the shares. By raising cash this way, rather than via a rights issue, Barclays will avoid seeing its share price fluctuate. Volatility in the shares of its rival HBOS is threatening its £4 billion rights issue.

Barclays also repeated earlier statements on pre-tax profits, which in May were ahead of last year in retail and commercial banking and in line with May 2007 in investment banking and investment management.

Analysts welcomed the capital raising, as did the bank's rivals. “It's good for the whole sector that this has been done,” a banker said. “If the announcement had been later than this week, it would have hit all the banks' share prices.”

Barclays' shares closed up 6.5 per cent at 331p. The bank was advised by JPMorgan Cazenove and Credit Suisse. Further details about the capital raising were due out late last night in the bank's prospectus.

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