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Government refutes bank nationalisation rumours

The UK government has come out today and refuted allegations that plans are already afoot to nationalise vast areas of the UK financial system. The likes of Barclays bank and Lloyds TSB have been mentioned by many experts as potential candidates for nationalisation in return for a taxpayer funded rescue package. Aside from the Royal Bank of Scotland, which is already 70% owned by the UK government, the share prices of Barclays bank and Lloyds TSB have been decimated over the last few days. So what next?



In a chillingly similar situation to the demise of HBOS we have seen the likes of Barclays bank and Royal Bank of Scotland in particular targeted by short sellers in the market amid suggestions that they both need substantial capital injections. However, despite repeated attempts to shore up the market and increase investor confidence the share prices keep on falling and falling. The lower the share prices fall the one that will more likely that the banks will need to be nationalised sooner rather than later in order to protect the overall UK banking system.



There are serious concerns that the UK government would be forced to take over more than just Barclays bank and Royal Bank of Scotland as the potential knock-on effect of any nationalisation at this stage could be dramatic. Slowly but surely we are edging towards a financial sector which will be dominated and controlled by the UK government, but funded by the UK taxpayer. Not necessarily a positive factor for potential long-term economic growth!

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