Scots housebuyers to benefit as RBS makes £1.7bn available for borrowing

Published on Tuesday 10 March 2009 20:48

THE beleaguered Scottish housing market is expected to receive a major boost following the announcement today that the Royal Bank of Scotland is to make £1.7 billion available for new borrowing this year and next.

The RBS Group, which has been effectively nationalised by the government, disclosed that it is to free up 9 billion for the housing market across the UK in 2009, 1.7 billion of which will go to Scottish customers.

RBS also said it would go further if demand for home loans went further than the 1.7 billion total. Another 16 billion is to be made available for loans to small and medium-sized business across the UK.

Ministers agreed to fund the massive bail-out of RBS in return for guarantees that the bank would continue to lend money both to housebuyers and businesses.

Today's announcement represents the first real indication that the government's pressure is working, with 25 billion expected to be freed up over the course of this year for RBS customers.

However, the announcement came too late for one English company. The Shropshire-based Wrekin Construction Group, which employs 600 workers across the UK, went into administration.

The local Conservative MP, Mark Pritchard, said Wrekin had a good order book but had been forced into administration because of RBS's "inflexibility" in releasing funds.

Mr Pritchard said: "This is a long-standing and successful company with a large order book which has been driven into administration by the inflexibility of RBS… Some of the blame has to fall on the doorstep of 10 Downing Street, given the government's majority shareholding in RBS."

It also emerged yesterday that, although RBS has been lending, many of its loans have been going abroad.

Dealogica, a financial data provider, said RBS had worked as a fixer or bookrunner for some of the biggest syndicated loans outside the UK. This included a 9.3 billion loan for Caisse d'Amortissement de la Dette Sociale and a 7.3 billion loan facility for the Italian power group Enel.

While British businesses, such as the Wrekin Construction Group have been forced to close after failing to obtain bridging loans to see them through the downturn, the bank has lent money for projects in Australia, Abu Dhabi and Qatar.

RBS agreed last week to lend $200 million (145 million) as part of a $1.5 billion loan to Qatar Telecom.

A university campus in Abu Dhabi has also been built thanks to a $50 million loan.

RBS also financed the buy-out of MYOB Ltd, a software firm in Australia, by the private-equity companies Archer Capital and HarbourVest Partners LLC.

The Italian yachtmaker, Ferretti, has also had its debt restructured by RBS.