The Thatcher governments were focused on privatisation from the very start, but such policies have been rarer in the decades since.
But at some point soon, UK taxpayers will get the chance to buy something from the denizen of Downing Street when the government sells off its stake in NatWest, the listed bank formerly known as RBS.
Previous privatisations meant taking a stock market listing for various businesses that were state owned, such as Amersham International (in nuclear research) and Cable & Wireless (in overseas telecoms).
The principle aim of these privatisations was a belief that the businesses would perform more strongly away from state ownership – although that government was also trying to reduce the number of “lame duck” businesses supported by the taxpayer, such as British Leyland. It also wanted to reduce the number of workforces whose wage demands ended up coming to Whitehall.
Share ownership
The 1984 British Telecom privatisation added another aim: using these flotations to increase private share ownership. In 1980, Margaret Thatcher had introduced the right for tenants to buy their council houses and she believed that this, alongside share ownership, would give more people a greater stake in the future of the country.
The state companies that were promoted to the public tended to be businesses whose main activity was easily understood: British Telecom in 1984, British Aerospace 1986, and both British Airways and Rolls-Royce in 1987. The largest marketing campaign came with the “Tell Sid” British Gas sale in 1986.
Private client direct share ownership increased significantly through this process. Also, long-term shareholders in many of these companies have enjoyed very good investment returns, British Gas possibly giving the strongest return as the company split into its oil production assets – Britoil taken over by BP in 1988 – gas transmission assets that were acquired by National Grid, and Centrica, which owns the continuing British Gas assets.
The worst-performing shares has been British Telecom, whose share price today is 105p, rather lower than the 130p it was priced at 40 years ago. The company has paid a lot of dividends between times, but the shares also hit £15 briefly during the 2000s dotcom boom.
So will the NatWest share sale be a British Gas success or a British Telecom flop for Sid the retail client, and how should a wealth manager handle questions around this if asked by their clients?
Banks are not like other listed companies. The circumstances that resulted in the Treasury owning its 31.8 per cent stake in NatWest illustrates that point – in 2008, the government took RBS Group into state ownership to ensure it was financially stable through the global financial crisis. It then sold shares in five tranches to reach the current stake, the most recent sale being in 2022 at 220.5p, compared with a share price of 276.6p today.
