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U.K. Chancellor of the Exchequer Philip Hammond faces an 18 billion-pound ($22 billion) hole in his budget update as the government expects further delays in disposing its stake in Royal Bank of Scotland Group.
Britain's Office for Budget Responsibility scrapped an estimate made in March for the nation to recover 21.5 billion pounds from selling its 73 percent stake in Edinburgh-based RBS over the next four years, documents released on its website on Wednesday show. Sales of other nationalized banking assets, including the loan book of failed lender Bradford & Bingley, will make up some of the gap, the statement showed.
RBS Chief Executive Officer Ross McEwan's failure to sell the bank's Williams & Glyn unit and a looming settlement with U.S. authorities over the sale of mortgage securities has left Hammond stuck with the bank eight years after it required a 45.5 billion-pound bailout. Hammond has gone ahead with selling the nation's remaining 8 percent stake in Lloyds Banking Group at a loss.
The value of financial asset sales for the U.K. has been "reduced significantly relative to our March forecast due to RBS share sales being put on hold," the OBR said in the documents released alongside Hammond's Autumn Statement. The chancellor has said it's not practical to sell RBS until some of its issues are resolved.
The fiscal watchdog now sees 37.2 billion pounds generated from sales by the end of March 2021, including 1.7 billion pounds this fiscal year, down from 55.6 billion pounds in the previous estimates.
The U.K. government restarted the sale of as much as 15.7 billion pounds of Bradford & Bingley mortgages last month after the process was paused in the wake of the Brexit vote. The nation will also seek to dispose of an additional 5 billion pounds of assets held by U.K. Asset Resolution Ltd., which manages the country's stakes in collapsed banks.
The OBR estimates the U.K. is 26.8 billion pounds short of recovering the 136.6 billion pounds it spent bailing out the banking industry in the financial crisis. That shortfall includes the 15.9 billion-pound current market value of the government's RBS stake, the documents show.