UK Government in talks over selling part of RBS stake to Abu Dhabi

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By Andrew Barr

The UK Government has held discussions over selling part of an 82 per cent stake in the Royal Bank of Scotland.  The stake, which is currently held by UK taxpayers, could be sold to an Abu Dhabi sovereign wealth fund at a loss.

£45.5bn of taxpayers’ money was invested by the UK Government in 2008-9 in order to prevent the bank from collapsing.  At the time the UK Government bought RBS shares at an average of 50p, almost double that of the current price.

Up to a third of the UK Government’s stake could be sold to Abu Dhabi, which is likely to be a loss making sale.  Taxpayers could lose £1bn for every £1bn paid to the UK Government, according to current share prices.

Abu Dhabi, a small state in the United Arab Emirates, is home to the world’s largest sovereign wealth fund, estimated by the Economist to be worth around £550bn. Like Norway and Scotland, Abu Dhabi is relatively small in size but gifted with high levels of oil and gas reserves.

Chris Leslie, Labour’s shadow financial secretary to the Treasury, said: “It’s vital that taxpayers get back the money they invested in RBS.

“We mustn’t have another rushed sale by George Osborne, like the loss-making selloff of Northern Rock, which leaves the British taxpayer hundreds of millions of pounds out of pocket.”

The potential sale of RBS shares to an Abu Dhabi sovereign wealth fund could be met with difficulty as the bank is currently undergoing an overhaul and restructuring of business.

However, the deal could prove politically beneficial to the coalition, helping to divert pressure from the UK Government towards the next controversial bankers’ bonus season, potentially allowing the argument to be made that executive pay is no longer the sole responsibility of the Treasury and UK Financial Investments.

Simon Denham, chief executive of Capital Spreads, said: “The coalition is probably crying out for a buyer so that it doesn’t have to deal with attacking or even defending bankers in a year’s time.”

The talks have also been met with fierce opposition from Liberal Democrat peer, Lord Oakeshott, who said: “Flogging off RBS shares this year at a loss would be the worst of all worlds. We poured £45bn into RBS to save it and make it lend, not as a share punt.”

The Treasury has played down proposals for an early selloff, claiming its current strategy for recovery is working.

A Treasury spokesman said: “The aim is to repair and return RBS to full health so that it is able to support the UK economy in the future, and the current strategy is working to achieve that. The Government’s policy has always been to return RBS to the private sector, but only when it delivers value for money for the taxpayer.”