Royal Mail price may have safeguarded future privatisations

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It's been three months since the government first sold off Royal Mail shares, and there's another "dog bites man" story going around this morning as Labour's Chuka Umunna has yet again attacked the sale as being far too cheap.

Umunna has said that "the business secretary's dismissal of the sharp rise in share price as 'froth' has been demolished and increasingly it looks like the taxpayer has been left short-changed".

Royal Mail shares have risen by roughly 70 per cent since being issued at 330p. They peaked at around 607p last month.

But Joe Rundle, head of trading at ETX Capital, says that Labour's attacks ignore that the government had their reasons to "push down the issue price". If the sale had failed to attract sufficient demand, then the government would have faced an even worse backlash.

As the government needs to offload its stake in Lloyds and RBS before the next election, a more expensive Royal Mail sale may have made it difficult to secure the support of big institutional shareholders and foreign investors.

Shares in the postal company have risen by about one per cent to 566.50p this morning.