Scots firms may get cash boost as new lender enters market

Published on Friday 3 September 2010 21:13

CASH-strapped Scottish firms could benefit from the expansion of a new lender specialising in the support of mid-sized corporates as existing banks struck hard by the financial crisis continue to decline loans.

• David Lonsdale, assistant director of CBI Scotland

Haymarket Financial, a London-based bank which launched last December, has raised €450 million (375m) from financiers Lord Rothschild, Sir Ronald Cohen and an Australian sovereign wealth fund bringing investment in the bank to €1 billion. The bank aims to target business worth 84m-417m which are considered too small to tap bond markets.

Scottish firms are less likely to take on bond debt due to their smaller size, increasing their reliance on bank lending.

The investment boosts prospects for UK firms after the Bank of England estimated that the UK economy has been drained of 62.2bn of bank lending since January 2009 when the financial crisis caused lenders to withdraw support of UK firms. The Bank warned that persistently tight credit conditions threatens the UK's economic recovery.

David Lonsdale, assistant director of CBI Scotland, said: "One of the biggest economic challenges we face as a nation is the need to get many more companies of scale north of the border. They need to be able to access growth capital and this sound like a new, fresh route for doing that. It is very encouraging news."

Haymarket Financial is the largest lender to emerge since the crisis. Sir Richard Branson's Virgin Money is estimated to be smaller, at around 500m, Other new entrants currently raising funds include Walton & Co, which is currently aiming to raise 100m, and NBNK Investment. The latter, chaired by City grandee Lord Levene, is understood to have raised 50m so far.

Yet banks that have suffered during the credit crunch continue to decline. The nationalised Anglo Irish Bank may be forced to pull out of Britain by the EU under the terms of a multi-billion-pound rescue deal.

Brian Lenihan, Ireland's finance minister, will this week meet Joaquin Almunia, the EU's Competition Commissioner, over plans to split the troubled lender into "good" and "bad" banks. Anglo ran into trouble after becoming one of the most aggressive lenders in the UK real estate market.

And Nationwide Building Society is set to announce the closure of its network of agencies based with firms such as solicitors and estate agents, potentially affecting hundreds of staff.

The network trades under the Nationwide, Dunfermline, Cheshire and Derbyshire brands. The staff are not directly employed by Nationwide.

The decision would come just two months after Lloyds Banking Group said it was closing its 265-strong network of Halifax-branded agencies as part of ongoing cost-cutting.It will begin closing the counters? next month.

Yet Metro Bank, which opened its second branch in London last month, claimed it has hit its one-year target for customer accounts just five weeks after opening its first branch.