The government’s decision to shelve plans to offer part of its remaining stake in Natwest to retail investors has brought past privatisation schemes back in focus.
Treasury sources confirmed to City A.M. last week that Rishi Sunak’s decision to call a general election for 4 July meant plans to sell a chunk of its 27 per cent stake to the general public had been put on ice. Meanwhile, Labour has pledged to “review” the plans – opening the door to scrapping the scheme entirely.
But fresh data shows that similar privatisation efforts have triggered a sharp uptake in retail investment, offering hope for London’s beleaguered stock market.
Roughly a quarter of UK adults invested in privatisations between the late 1970s and 2014, according to a survey of 2,000 people commissioned by broker Hargreaves Lansdown.
Of these respondents, a third (34 per cent) still held at least one of the companies they invested in.
While 21 per cent of participants built an investment portfolio after taking part in privatisation, nearly two in five (38 per cent) sold up without investing further.
Over this period, the government privatised more than 40 state-owned companies, including telecoms giant BT, oil and gas supermajor BP and airline British Airways.
When he first announced plans to explore a retail offer for Natwest last November, Chancellor Jeremy Hunt referenced the Thatcher-era “Tell Sid” campaign, which encouraged the public to buy shares in British Gas.
Hargreaves Lansdown noted that campaigns like these helped shareholders rise from just seven per cent of the UK population in 1979 to 25 per cent a decade later.
Susannah Streeter, head of money and markets Hargreaves Lansdown, said: “Schemes like this have the power to encourage new investors, so it’s hoped this will be revisited by whoever wins the election.
“Past privatisation schemes, brought in newcomers and super-charged investing habits for many novice shareholders, but others refrained from dipping their toe further into the market, and heightened interest in the stock market ebbed away during following years.”
Still, the number of Britons investing directly in the stock market remains around a quarter, which fares poorly with European rivals.
In the US, roughly 61 per cent of adults holds shares, while 36 per cent of household financial assets are in stocks.
“There is still considerable value in London-listed companies to be unlocked,” Streeter said.
“Although the FTSE 100 has reached record gains recently, the number of overseas firms still circulating potential targets on the LSE, is an indication that UK assets are considered cheap compared to peers overseas.”
Hargreaves Lansdown had reportedly been in talks with the Treasury to help market the Natwest shares to retail investors. Streeter told City A.M. that as the UK’s largest stockbroker, the firm had expected to be intermediary.