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Is the UK government looking to spin off banking stakes?

The fact that the UK government effectively owns Northern Rock, the mortgage operation of Bradford & Bingley and a majority of Lloyds Bank, HBOS and Royal Bank of Scotland has been something of a millstone around the neck of Gordon Brown. However, as the UK government becomes more and more desperate to raise much-needed finance in the short to medium term, and ahead of the next general election, there is intense speculation that a sell-off of part or all of the governments banking share stakes could be on the cards over the next 12 months.

However, as we touched on in our earlier post regarding the Northern Rock and a proposed part sale before the end of 2009, the UK government is unlikely to receive a "fair value" for any possible share stake sales. Despite the fact that the authorities had initially indicated these stakes could be held for a number of years to allow taxpayers the opportunity for a "decent return" it would appear that short-term desperation could outweigh the potential gains in the longer term.

In many ways the UK government is in a no-win situation because it already has control over a significant part of the UK financial sector, with many calling for this control to be reduced, while many believe now is the wrong time to dispose of any share stakes in the likes of Northern Rock, Lloyds Bank, HBOS and Royal Bank of Scotland.

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