Britain will provide $2 billion in credit guarantees to Saudi for the purchasing of British goods and services. Britain denied that this is in parts to influence the listing of shares. The loan agreement comes as the London Stock Exchange is contending to introduce a portion of Saudi Aramco’s initial public offering (IPO), which is anticipated to be the largest float in history.
“This builds on previous support for UK exports as part of Saudi Aramco joint venture projects,” the government stated on Thursday. A spokesman for Britain’s finance ministry stated that the credits are not involved with the country’s efforts to obtain the IPO for London.
New York, London, Tokyo, Hong Kong, as well as domestic exchanges have been considered for the partial listing of the state-run firm according to Saudi officials.
New guidelines proposed by Britain’s financial regulator allowing sovereign-controlled entities like Saudi Aramco to have access to its own ‘premium listing’ category as well as being excused from prior requirements such as the amount of a company that has to be floated.
As Britain is preparing to leave the European Union, the British government more specifically the City of London are competitive to obtain the listing to add an increase to the country’s capital markets.
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Yet, some fund managers contest the proposals believing it would remove the rights of the smaller investors.
“(Britain’s government) guaranteeing a loan to ARAMCO would be a further lurch in descent to mercantilism,” said Nick Macpherson, former top civil servant at the finance ministry.
Crown Prince Mohammad bin Salman had stated that the IPO which is part of his plan to diversify the Saudi economy beyond oil remains on track for 2018.
The $2 billion facility is being wrapped up by the UK Export Finance which works to grow British exports by funding overseas buyers the country’s goods.