RBS uses cheap state funds to cut loan rates

Tim Wallace
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MID-SIZED firms will today see their borrowing costs sliced by RBS as the state-backed bank passes on the savings it gets from the government’s latest cheap funding scheme.

Business group the CBI welcomed the drop, arguing that more support for the sector could both “rebalance” the economy and boost growth.

Credit-worthy manufacturers with a turnover of between £25m and £500m will now be offered three-year loans at a fixed rate of 2.75 per cent, down from 3.45 per cent, and five-year loans at 3.2 per cent, down from 4.25 per cent.

However RBS has not given any target on how far it will increase lending, arguing that any rise in lending must depend on demand for credit from the firms.

“Mid-sized manufacturers are key in helping the UK grow and export out of recession,” said RBS’s Peter Russell. “We hope it will be a catalyst for investment.”

The funding for lending scheme (FLS) was launched by the government to give banks access to cheap credit as long as they raise lending to businesses and households.

“Support for medium-sized firms continues to be important as they represent 30 per cent of the UK’s manufacturing base,” said the CBI’s Matthew Fell.

“We believe that these companies could help to rebalance the economy.”

The CBI estimates that if more mid-sized firms can reach their potential it could add between £20bn and £50bn to annual GDP growth.