LLOYDS Banking Group, the state-backed high street lender, is in talks to buy a stake in a Formula One racing team.
Lloyds, which is 43%- owned by the taxpayer, wants to invest up to £15m for a minority share in Manor Motorsport, one of three new teams due to join F1 next season.
The controversial move follows the decision by other bailed-out banks to sever ties with the glamorous but costly racing world. Royal Bank of Scotland, which is 70%-owned by the government, announced in February that it would end its £10m-a-year sponsorship of the Williams team.
The potential investment in Manor is being led by LDC, the private equity arm of Lloyds.
If a deal is agreed, it is understood that the bank will not have its name emblazoned on the Manor car or become involved in any other promotional activity.
Lloyds would be buying into a company with a strong motorsport tradition. Manor has nurtured some of the top drivers including Lewis Hamilton and Kimi Raikkonen, who have both won the world championship.
Vince Cable, the Liberal Democrat Treasury spokesman, said : “Many customers will find it impossible to understand why, when Lloyds is cutting back on lending to thousands of small but sound British companies, they have money to spend on vanity projects of this kind.”
The traditionally high cost of running an F1 team has forced some motor manufacturers to quit the sport. Honda pulled out in 2008, while BMW has said it will withdraw at the end of this season.
It is estimated that the F1 carmakers collectively spend more than £600m each year.
However, one industry insider said that changes to be introduced next season, including budget caps, will make F1 more financially viable and attractive to new investors. Manor hopes that securing financial backers will guarantee British jobs.
A source close to LDC said : “They are not doing this for the sponsorship or the glamour. This is about backing a strong management team in a specialist engineering business.”