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Small biz still struggling for funding as RBS flounders

Last roll of the dice for UK economy

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Royal Bank of Scotland has recorded the largest loss in UK corporate history and is being bailed out again by the Treasury, while small and medium businesses are still struggling to get hold of credit.

RBS lost £40bn before tax in 2008, despite two government bailouts, on a total income of £25.8bn - after excluding parts of the disastrous ABN Amro takeover this falls to a £24bn loss.

RBS group chief executive Stephen Hester admitted the government, already the majority shareholder, could end up owning as much as 95 per cent of the bank "depending on how things work out".

The bank promised to cut £2.5bn from annual costs - part of which is likely to hit the IT department and other back office expenses - RBS already employs 10,000 people in India including over 1,000 in application development.

The UK Treasury is bailing out the bank with more funding, and will underwrite £325bn of dodgy RBS assets. The Treasury will also hand over £13bn in cash and subscribe to another £6bn in options. In return RBS pledges to make £9bn in mortgage loans and £16bn in business loans.

Minister for the death of the UK economy Lord Myners is also giving further details today on the broader Treasury underwriting of toxic assets. The UK taxpayer will underwrite up to 90 per cent of bank losses on certain assets.

Banks can apply for this protection in return for a fee, and promises to increase lending to homeowners and businesses. More details here.

This is seen by many observers as the government's last chance to achieve its objectives the first bank bailout in October also promised to force banks to increase business lending.

Meanwhile, evidence is emerging that the government's previous £1bn Enterprise Finance Guarantee is failing to have much impact on SME's ability to secure funding.

Kevin Dickens, chairman of UK 200 group, told Accountancy Age there was still a lack of information and preparedness about the scheme at all UK banks.

RBS's ex-chief executive 50-year-old Sir Fred Goodwin is also under fire this morning for collecting a £650,000 a year pension. ®

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