Manufacturers welcome RBS's £1bn finance fund

THE Royal Bank of Scotland yesterday announced that it was creating a £1bn finance fund to support manufacturers who are struggling to cope with 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.

According to RBS, around 15,000 Yorkshire and Humber firms could be eligible to benefit.

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RBS – which is 84 per cent owned by taxpayers – is offering manufacturers loans of between 250,000 and 25m 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 revealed yesterday 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 began.

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."

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

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 per cent of loan requests from businesses.

A spokesman for manufacturing body the Engineering Employers' Federation (EEF) said yesterday's 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."

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