Member Article

Taxpayers lost out on £180 million from Royal Mail privatisation

According to a report commissioned by Business Secretary Vince Cable, the government made £180 million less from the £2 billion sale of Royal Mail than it could have.

The report states that shares could have been valued up to 30p more than the flotation price of 330p because of the high level of demand from banks and individuals.

Shares in 60% of Royal Mail were sold in the flotation. A further 10% of stock was given to the company’s employees, while the government retained a 30% stake.

Royal Mail shares leapt on their first day of trading in October 2013 by 38%, rising later to a peak of 615p. They now stand at 394p.

The report by former City minister Lord Myners ssaid future government share sales should be more transparent and the pricing could be set at a later stage.

MPs have suggested previously that taxpayers lost out by £1 billion in the 2013 privatisation.

Lord Myners’ report says that a higher price could have been achieved but that “the consensus appears to be that this was the order of 20p-30p per share… equating to proceeds to government at IPO of £120-180m”.

It adds: “For the avoidance of doubt, we do not believe that a price anywhere near the levels seen in the aftermarket could have been achieved at listing.”

Lord Myners said: “The sale was done against a backdrop of global economic uncertainty and a threat of industrial action, which go a long way towards explaining the cautious approach taken throughout the process.

“We found no evidence to challenge the general assertion that an IPO price greater than 350-360p could have been achieved and we accept that a decision to revise the range would have come with added uncertainty and risk. The right decisions were made.”

Vince Cable said: “It contains a number of significant proposals which could make the general process of future sales more transparent…

“In particular [financial regulators] should explore how digital auctions could, in certain circumstances, make the sale process much more flexible,”

This was posted in Bdaily's Members' News section by Clare Burnett .