RBS acts over possible Direct Line sale

The European Commission ordered the bank – which is 83 per cent owned by the taxpayer – to sell Direct Line by 2013 to soothe competition concerns following its Government bail-out.

Berkshire Hathaway, the investment vehicle owned by philanthropist Mr Buffett, who turns 80 today, is among a line-up of potential bidders interested in the business, according to reports yesterday.

American insurer Allstate is also one of the potential buyers, it was claimed.

RBS would not comment on speculation over potential buyers, but did confirm it had brought in a team of advisers to handle the sale.

Direct Line was being lined up for a stock market flotation, but significant losses made by the business are thought to have derailed this plan.

Direct Line paid out 2.1bn in claims between January and June, a 36 per cent increase over the previous year.

That pushed it into a loss of 231m for the first half, compared with a profit of 217m a year earlier.

As a result any bidder is likely to pay less than the 4.5bn offered by private equity giant CVC in 2009.

The offer came in an earlier sale process instigated by former chief executive Sir Fred Goodwin, who refused to accept offers of less than 6bn.

Berkshire Hathaway was involved in that process.

Earlier this week, RBS announced plans to axe 14 of the 27 offices in its Churchill and Direct Line business under

existing plans to cut

2,000 jobs.

Two offices will be shut in Glasgow, affecting more than 640 staff, while the raft of closures will also see offices shut in locations including Peterborough, Cardiff and Bristol.

Four offices in Yorkshire – together employing 3,600 people – will become "centres of excellence" for the insurance division, but 148 roles are being axed within the Doncaster office.

The part-nationalised bank delivered the blow to staff as part of a previously announced move to shed 2,000 jobs at the insurance division.