RBS unveils £1b fund for UK manufacturers

Royal Bank of Scotland has announced a £1 billion finance fund to support embattled manufacturers hit hard by the recession.

The dedicated fund comes as banks face calls to lend more and help lift the economy out of the worst recession since the Second World War.

RBS – 84%-owned by taxpayers – is offering manufacturers loans between £250,000 and £25 million at discounted rates and arrangement fees, with the option to defer capital payments and pay interest only for up to three years.

Its fund is designed to provide much-needed finance for manufacturers to take advantage of an expected increase in demand as economic conditions improve.

Official figures on Wednesday revealed that the sector’s output failed to grow for the second month in a row in November, but the annual rate of decline has eased to its lowest since the financial crisis begun.

Peter Ibbetson, chairman of business banking at NatWest and RBS, said: “We want to ensure we are doing everything we can to assist the sector as conditions begin to improve. As we see many of our manufacturing customers turning their thoughts to investment in order to drive competitiveness, we want to send a clear message of support to them by creating a fund that is designed specifically to enable that investment.”

Manufacturers will be able to access loans on two and three-year fixed rates of 3.4% and 4.3% respectively, with fees of 0.75% – a discount on fees that are often above 1%, according to RBS.

The fund represents less than 10% of RBS’s existing commitments to the sector and is likely to go only a small way towards meeting demand for affordable finance among struggling businesses.

Part-nationalised RBS and Lloyds Banking Group have already admitted they are woefully short of Government targets to lend to businesses. RBS boss Stephen Hester insisted in a hearing with MPs earlier this week that this was partly due to lower demand, with the bank approving 85% of loan requests from businesses.

A spokesman for manufacturing body the Engineering Employers’ Federation (EEF) said the news was a welcome step forward after two years of increasing finance costs and lower accessibility. He said: “Manufacturers have had a rough ride from the financial sector over the past couple of years. But a recovery is on the way and companies will need the support of the banks as they invest and gear up for growth.”

Source: Association Press