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Mansion House speech: Government to sell stake in Royal Mail
Mansion House speech: Government to sell stake in Royal Mail
(35 minutes later)
Chancellor George Osborne tonight announced that the Government had begun the sale of its remaining stake in Royal Mail and that it would give up to a further 1 per cent tranche in the company to employees.
The Government has started selling of its remaining stake in Royal Mail, Chancellor George Osborne has announced.
It means staff including postal workers across Britain will share in a chunk of the company worth around £50 million, adding to the 10% awarded to employees when the Coalition began the flotation of the then state-owned firm in 2013.
Business Secretary Sajid Javid has authorised the start of an “accelerated bookbuilding” process which will see the taxpayer-owned portion in the group halved from 30 per cent to 15 per cent.
However it comes after a year in which Royal Mail cut the number of employees by 5,500. It has around 143,000 staff in its main UK business.
Addressing an City audience at Mansion House in the heart of London, the Chancellor also said the Government would give up to a further 1 per cent tranche in the company to employees. This will allow staff, including postal workers, to share a £50million slice of the company.
The share sale announced tonight will see a 15% portion of the group, worth about £775 million at its current market value, placed with institutional investors - rather than sold to members of the public.
The chunk comes on top of the 10 per cent awarded to employees when the Coalition began the flotation of the then state-owned firm in 2013.
Business Secretary Sajid Javid authorised the start of an “accelerated bookbuilding” process which will see the taxpayer holding in the group halved from 30% to 15%.
However, the fate of employees as the firm becomes fully privatised remains uncertain, after Royal Mail cut the number of employees by 5,500, leaving it with around 143,000 staff in its main UK business.
But ministers were immediately criticised by Labour, who said they had failed to learn lessons from the earlier “botched fire sale” of the company.
The deal will also see a 15 per cent portion of the group, worth about £775 million at its current market value, placed with institutional investors instead of being sold to members of the public.
Mr Osborne told a City audience at the Mansion House that the sale of the remaining stake had begun.
The Government is selling off its stake in Royal Mail (Photo: Getty) Osborne went on to use his speech to tackle previous criticism that the Coalition Government sold Royal Mail off for cheap, after the share price soared immediately and investors were left with an instant profit at the taxpayers' expense.
He said: “We want to help the Royal Mail attract more investment and serve its customers, and use the money we raise in return to pay down the national debt.
“We want to help the Royal Mail attract more investment and serve its customers, and use the money we raise in return to pay down the national debt.
“And we're also going to make sure that there is a special bonus for the workforce who have done such a great job turning Royal Mail around.
"And we're also going to make sure that there is a special bonus for the workforce who have done such a great job turning Royal Mail around.
“Thanks to them, Royal Mail's share price has risen; so we're going to give more of the shares to the staff. Tomorrow we will announce more details of that, and how much of our stake we have sold.”
"Thanks to them, Royal Mail's share price has risen; so we're going to give more of the shares to the staff. Tomorrow we will announce more details of that, and how much of our stake we have sold."
Shares in the group have risen about 20% since the start of the year.
At the start of the year, shares in the group had risen by around 20 per cent.
The Government is selling off its stake in Royal Mail (Photo: Getty) Today they ended the session at 516.5p, more than 50% higher than they were when the rest of the company was floated in 2013 - in a controversial process, partly including a retail offer to ordinary members of the public.
Ministers at the time came under fire after the share price soared immediately, leaving investors with an instant profit at the expense of taxpayers.
Tonight a Business Department spokesman said: “The Business Secretary has today authorised a sale process to begin.
“Current market conditions represent a good opportunity to achieve value for the taxpayer.
“The universal service is strongly protected by law and Ofcom has a duty to ensure its provision. Therefore the Government sees no policy reason to retain a stake in Royal Mail.”
The announcement comes a week after Mr Osborne announced that the Government's remaining stake in Royal Mail was to be sold off within months.
The announcement comes a week after Mr Osborne announced that the Government's remaining stake in Royal Mail was to be sold off within months.
Shadow business secretary Chuka Umunna MP said: “It's disgraceful the Government is rushing to dump its stake in Royal Mail to City speculators without giving ordinary investors a look in.
But ministers were immediately criticised by Labour, who said they had failed to learn lessons from the earlier “botched fire sale” of the company.
“The Government does not seem to have learnt the lessons from their initial botched fire sale of the Royal Mail.”
Additional reporting by PA
Last month, Royal Mail said annual profits had risen by 6% on an underlying basis to £740 million in the year to the end of March as a squeeze on costs helped offset a lower than expected performance from its parcels business.
The group warned that the parcels and delivery market remained challenging and pointed to the threat from Amazon's delivery network.
Chief executive Moya Greene saw her pay increase by 13% to £1.52 million in the last financial year as her basic salary was hiked for the first time since she joined the company in 2010.
