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Britain’s opposition party has flagged concerns about plans to provide a $2bn loan guarantee for Saudi Arabia’s state energy giant Saudi Aramco, which has emerged as London is vying to host a stock exchange listing for the world’s largest oil producer.
John McDonnell, shadow chancellor, wrote to the government on Tuesday demanding answers on the proposed credit backstop, asking what conversations had taken place between ministers and their Saudi counterparts before the loan guarantee was agreed.
In his letter to chancellor Philip Hammond, seen by the Financial Times, the Labour MP asked on what grounds and on what evidence the decision had been made, and whether it was in the interests of the British public.
“Has the UK government’s attempt to secure the listing of the Aramco IPO on the London Stock Exchange formed the basis of, or in any way influenced, the decision to agree the loan guarantee and will you publish all correspondence you, cabinet colleagues or Treasury officials have had with UK Export Finance on this matter?” Mr McDonnell wrote.
The letter comes after the FT first reported the UK was close to finalising the $2bn loan guarantee with the world’s largest oil producer through its UK Export Finance (UKEF) group.
UKEF provides overseas purchasers of UK goods and services with credit lines and guarantees in order to buy British.
Saudi Aramco declined to comment.
London is in a battle with New York and other global stock exchanges to host the international listing of Saudi Aramco, which Saudi officials believe could value the company at $2tn, making it the world’s biggest ever initial public offering.
Earlier this year Theresa May visited Riyadh alongside Xavier Rolet, chief executive of the London Stock Exchange, as part of the British government’s attempt to secure the flotation. President Donald Trump has also made a public bid, writing on Twitter that choosing the New York Stock Exchange would be “important to the United States”.
Although Saudi officials are considering different international stock exchanges, they are also exploring other options than an oversees listing. Officials have recently said they could opt for a private placement and domestic listing instead.
The increasingly aggressive campaign by the British government to win the offering has spurred criticism at home. It has coincided with plans by the Financial Conduct Authority to relax listing standards and create a “premium” listing category that would exempt state-controlled entities from some rules that could harm minority shareholders.
The shadow chancellor demanded to know what “representations” ministers or UK regulators had received or made to Saudi Arabia’s government or the company itself regarding listing rule changes.
“What representations have you, any of your cabinet colleagues, including the prime minister, or representatives of the Treasury made to either the Financial Conduct Authority or the London Stock Exchange surrounding the loosening of the regulatory criteria the FCA uses in determining the requirements on companies controlled by government in seeking to list on the London Stock Exchange?”
The Saudi Aramco credit backstop would be one of the UK’s largest ever — the biggest was last year’s $2.1bn guarantee to Oman to support the purchase of BAE Systems military hardware.
Nicholas Macpherson, the top civil servant at the Treasury until last year, described the $2bn loan guarantee last week on Twitter as “a further lurch” in the UK’s “descent to mercantilism”.
One person familiar with the transaction had told the FT it was a “desperate” attempt to secure the Saudi Aramco IPO, while another had said the timing was “suspect” as it coincided with the UK bid.