Will Britons buy into Royal Mail?

[TrueBlueTerrier]

http://www.ft.com/cms/s/0/b0581236-7f24 ... z1rdWLEqVi" onclick="window.open(this.href);return false;



The coalition hopes to draw on public affection for Royal Mail in a stock market flotation, probably in autumn 2013. But even if it succeeds in selling a chunk of the world’s oldest postal service – the most ambitious privatisation since British Rail – it seems unlikely to rekindle the frenzy over privatisation shares seen in the mid-1980s.

Privatisation of industries from gas to steel is seen, rightly, as a lasting legacy of Margaret Thatcher’s rule. As the Iron Lady put it: “From France to the Philippines, from Jamaica to Japan, from Malaysia to Mexico, from Sri Lanka to Singapore, privatisation is on the move.”

In most cases, analysts say it has brought benefits to consumers in lower real prices, cost cuts, better services and higher investment, particularly where competition was allowed to develop. Revenues from share sales and advice on privatisation worldwide also helped to build the City’s global strength.

But even in the 1980s, much of public opinion was sceptical, exacerbated later by the difficult rail sell-off. Opposition to privatisation of the National Health Service, for example, remains strong. Polls for 20 years have shown majorities against selling Royal Mail, even among Conservative voters. Big rises in stamp prices may make this even less popular.

Enthusiasm for a “share-owning democracy” lasted only as long as shares were offered cheaply. Losses in the Black Monday crash in October 1987, when the stock market dropped 20 per cent in a day, put many off.

If conditions do not favour early flotation, one route may be selling a stake to a private equity firm followed by flotation later, as happened with Qinetiq, the former defence research agency. In 2003, 34 per cent was sold to Carlyle Group, followed by an initial public offering in 2006 in which the Ministry of Defence sold most of its shares and Carlyle sold down its stake.

That privatisation was heavily criticised for crystallising multimillion-pound windfalls for Qinetiq’s bosses and senior scientists. Government insiders insist there are no meaningful parallels with Royal Mail. But privatising the postal operator, which is fighting a loss of traffic to electronic media, is no easy prospect, even with a pension write-off and higher prices.