LONDON, March 12, (Agencies): Britain’s top banks look likely to avoid massive losses on Dubai World’s debt pile, but have already seen about £1 billion ($1.5 billion) wiped off profits due to problem loans in Dubai and the region last year.
Optimism has grown this week that Dubai World is nearing a deal with creditors of its $26 billion debt that will see full repayment or only a small “haircut” on loans, compared to a 40 percent loss rumoured last year.

Yet recent results from UK banks show they have already taken a bloody nose from the region’s crisis.
Expatriates fleeing the country with debts unpaid, losses on property and corporate loans and rising unemployment have all contributed to a spike in bad debts.
UK banks have a hefty exposure to problems in the UAE, stemming from Britain’s traditional links to the region, the emerging markets focus of two big banks, and lending during the Dubai property boom.
HSBC, Europe’s biggest bank, swung to a $3 million loss in the UAE last year after an $861 million profit in 2008.

Standard Chartered’s bad loans in the Middle East and other South Asia region was $811 million last year from $185 million in 2008.
Barclays’ retail and commercial bad debts in the UAE and India jumped by 255 million pounds last year, while Lloyds’ bad debts in the Middle East and Latin America hit 69 million pounds from almost nothing and RBS cited weak real estate and construction in the region.
Last year’s jump was stark compared to low impairments in the previous few years, and bad debts should have peaked, analysts said, with the proviso that Dubai World could provide a sting in the tail.
HSBC’s impairment charges for the Middle East surged to $1.3 billion from $279 million, mainly on UAE real estate and construction losses. Credit cards and personal loans went unpaid and there were “large numbers of expatriate workers departing the region leaving debts unpaid”, it said.

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LONDON: Britain should examine the case for setting up a government-backed investment fund to help finance infrastructure projects, business minister Peter Mandelson said on Friday.
Mandelson said Britain may need to source as much as 500 billion pounds ($758 billion) for future projects to remain competitive and spur growth, with the bulk of that cash probably coming from private investors.
There has been speculation that the government’s budget on March 24 could contain details of such a venture.
“We need to mobilise private investors on a totally new scale,” Mandelson said, according to the text of a speech in the northern English city of Manchester.
“That has to include examining the case for public-sector backed financial institutions.”
The Labour government, facing the prospect of defeat in an election this year after 13 years in power, is looking at ways to encourage more private investment in the economy to reduce the burden on the public purse.
There will be no “Christmas tree” budget of pre-election giveaways later this month, Chancellor of the Exchequer Alistair Darling has warned here as talk of an election heats up.
Darling told the BBC that he would outline a “sensible budget” when he presents his annual 2010/2011 taxation and spending plans on March 24.
“I don’t think anyone’s expecting some sort of Christmas-tree-of-a-budget,” he said in comments aired late on Thursday.
“They’re not going to get anything like that. What you’re going to get is a sensible budget, a budget for the times in which we live, a budget for the future of the country.”
Prime Minister Gordon Brown announced the date of the pre-election budget earlier this week, in a move which fuelled expectations of a general election in May.
Several ministers have already suggested the general election — expected to be dominated by debate on the economy — will be held on May 6.
The British economy emerged from recession in the fourth quarter of 2009 with 0.3-percent growth, ending a record downturn that lasted for six successive quarters.
Chancellor of the Exchequer Darling is meanwhile grappling with dire public finances that have been hammered by the recession and a series of costly banking-sector bailouts.
State borrowing is expected to strike a record £178 billion (203 billion euros, $283 billion) in the 2009/10 financial year.
Brown and his ruling Labour Party remains set to lose the upcoming general election to the main opposition Conservatives, according to opinion polls.
Whichever party wins power, economists agree that big cuts in spending and increases in taxes are needed to fix the public finances.