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Investors: Govt must accept losses on RBS and Lloyds

The UK government will have to accept substantial losses on its stakes in both the Royal Bank of Scotland (RBS) and Lloyds Banking Group if it manages to sell them off within the next five years.

That is the opinion of a group of the country's most prominent investors, who have told Bloomberg the Conservative-Liberal Democrat alliance may lose a significant proportion of the cash it initially used to help these ailing companies.

Government officials are already involved in the process of sounding out funds in the Middle East about the possibility of them making investments in the banks, but domestic professionals have insisted that taxpayer losses are unavoidable.

Richard Black, fund manager at Legal & General Investment Management commented: "The Treasury has had to admit the prospect of making a profit on those stakes is now secondary to getting the best value for the taxpayer."

He went on to say that, realistically, no dividends will be paid soon from the financiers, meaning they represent "quite unappealing prospects" to investors.

By Gary Cooper