Re-visiting privatisation


Gratifyingly, privatisation featured in the recent Budget. Unfortunately, the easier pickings of the public sector were sold off a generation ago. What’s left is an eclectic group of public sector holdings. Prime amongst these assets are the Government’s 84% holding in RBS and its 41% stake in Lloyds. Despite some confident pre-Election assertions, no early sales seem likely.

There are renewed fears about the health of the banking sector, given the requirements of the new Basle 111 capital rules: the ongoing stress-testing of many EU banks is also spooking the market. Hence, any substantial sales of the Government’s bank shareholdings may be deferred.

However, other businesses are on the block. Foremost amongst them is Royal Mail. Ideally, it should be publicly floated, with a substantial tranche of shares set aside for employees: the pension fund, with its ever-widening deficit, should be retained within the public sector.

The Government has indicated that its minority stake in NATS is for sale. Ironically, Lord Tebbit, one of privatisation’s most tireless advocates, has publicly opposed this policy. Bids for High Speed One are being canvassed. Projecting the proceeds is complex, but private equity interest will be strong given the long-term contractual arrangements.

The Tote is once again for sale. Its value keeps tumbling as obvious bidders fall by the wayside – Ladbrokes and William Hill are effectively banned from bidding, while Coral’s finances are weak. Whether the student loan book can be privatised is questionable, especially given rising bad debts.

Some very profitable privatisation candidates remain, notably the Commonwealth Development Corporation (CDC), the 33% Urenco stake and BBC Worldwide: furthermore, the struggling Channel 4 should be sold.

The Government’s privatisation list should also include infrastructure businesses, such as Scottish Water, Northern Ireland Water, the leading Trust Ports, including Dover, and British Waterways.

Lots of talk but when will the privatisation action start?