Treasury hands a £1.5bn sweetener to £2trillion Saudi firm

The City bent its rules to lure the world’s richest oil firm to list in London. Now . . .

BRITISH taxpayers will back a £1.5bn loan to Saudi oil titan Aramco – as the Government tries to woo the company to float in London.

The City is fighting New York for the deal, which has an estimated value of £1.6trillion and would be the largest ever to go public.

Aramco is seeking to sell a 5pc stake to investors to raise cash for the Saudi Arabian government.

But the float has become controversial. In April, the Prime Minister Theresa May, along with London Stock Exchange boss Xavier Rolet, went to Saudi Arabia to discuss the deal.

Then, a few months ago, City regulator the Financial Conduct Authority (FCA) said it would water down listing rules to make Britain more attractive, prompting furious criticism from major investors. The changes came after the FCA met Saudi officials.

Now, the Government is helping the foreign state-owned company to borrow from banks. The Treasury’s UK Export Finance group is to guarantee £1.5bn of bank lending for Aramco to spend on investments.

It means that if the company is unable to pay the cash back, UK taxpayers will refund creditors.

Officials stressed the money will have to be spent on projects involving British exports.

But critics said the deal was suspicious. Labour MP Wes Streeting, a member of the Treasury Select Committee, said: ‘The irregular nature of this arrangement merits clear scrutiny, so I hope it’s something the commit- tee will look at in coming weeks.’ One source close to the Aramco listing reportedly said the bung was a ‘desperate’ attempt to secure the float for London.

Former top Treasury official Lord Macpherson blasted the plan on Twitter and said that the great free trading Victorian Prime Minister William Gladstone would ‘be turning in his grave’.

Treasury sources said guaranteeing foreigners’ loans was normal practice, as a way of boosting UK exports. However, the Aramco deal will be the second-largest done by UK Export Finance – beaten by a £1.7bn agreement with Oman last year, for BAE Systems fighter jets.

There are also no details about exactly what Aramco will spend the cash on. It yesterday agreed £3.4bn of deals with firms in Italy, Spain, China, Abu Dhabi and the US to boost fossil fuel production.

Trade Secretary Liam Fox ultimately signed off on the guaran- tee, which sources said would support procurement from British suppliers for two years.

Aramco has previously had £500m of guarantees from the UK. Winning its float will be seen as a coup for the City, a sign it can continue undamaged by Brexit. Critics of the FCA’s watering down of listings rules say that the current system underpins London’s credibility and that the FCA’s actions could cause serious harm.