RBS uses Bank of England scheme to ease manufacturing funding woes
RBS is to use the Bank of England’s Funding for Lending scheme to offer UK manufacturers cheaper funds to boost growth.
For the first time, RBS’ Manufacturing Fund will be targeted specifically at mid-sized businesses (MSBs). These firms typically have a turnover of £25m to £500m and are seen as a key source of future growth, often referred to as “gazelles”.
The CBI has said if more could reach their potential, it could add £20bn-£50bn to annual gross domestic product growth. Mid-sized businesses represent upwards of 30% of the UK’s manufacturing base.
Andrew Mitchell, regional director for Royal Bank of Scotland Corporate & Institutional Banking for the West Midlands, said: “Mid-sized manufacturers are key in helping the UK grow and export out of recession. Through Funding for Lending, these are the most competitive terms that we have been able to offer manufacturers for several years. We hope it will be a catalyst for investment.”
The RBS fund will offer UK manufacturers fixed and variable rate loans of between £250,000 and £25m with interest rates and arrangement fees for each new tranche of lending. Manufacturers will also benefit from being able to defer any capital repayments for two years.
Manufacturers will be able to access loans over three- and five-year periods. The fixed rates are 2.75% and 3.2% respectively (down from previous rate of 3.45% and 4.25%). For the first time, and directly linked to the Funding for Lending scheme, manufacturers will also be able to access variable rate loans in the fund, with a published interest rate margin of 2% for three years and for longer loans 2.25% plus three month LIBOR. All loan options carry an arrangement fee of 0.5% flat – another discount as these typically exceed 1%.
The RBS Manufacturing Fund was launched in January 2010. Manufacturers with turnover below £25m are being directed to RBS NatWest’s SME Funding for Lending offering, which has cut interest rates on £2.5bn of SME loans by an average one percentage point and was launched in August.
Recent EEF research predicts UK manufacturing sector output will expand by 1.5% in 2013. It also predicts that, for the next three months in 2012, 12% more manufacturers in the UK as whole expect manufacturing orders to increase as oppose to decrease.
Matthew Fell, CBI Director for Competitive Markets, said: “This is a welcome move from RBS, swiftly putting the Funding for Lending scheme into action to offer mid-sized manufacturers more accessible rates of borrowing.
“Support for medium-sized companies continues to be an important issue as they represent 30% of the UK’s manufacturing base. We believe that, if their potential is fully unlocked, these companies could help to rebalance the economy.”
