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To share or not to share - the great Royal Mail debate

By Niall MacKenzie - Posted on 17 July 2013

Dr Niall Mackenzie of Strathclyde Business School’s Hunter Centre for Entrepreneurship considers the argument for selling-off Royal Mail…

It’s now been more than 25 years since the denationalisation of British Gas sparked national interest in a shares issue with its innovative ‘If you see Sid tell him’ advertising campaign. This sparked a pre-digital viral campaign with word of mouth leading to 1.5 million people buying shares – many for the first time. In 1986 British Gas shares went on sale for 135p – today they’re worth 1185.50 so those who were patient enough to wait would today see a considerable return on their original investment.

British Gas was the first in a wave of denationalisations that are estimated to have created more than 20 million new shareholders in the 1980s. This month saw the announcement that Royal Mail was to float on the stock exchange. 10% of the shares will be given to workers for free with an estimated 150,000 people receiving £200m-£300m in shares – with the move intended as an incentive for staff to buy-in to the new company. If we are to assume that Royal Mail remains profitable this ‘money for nothing’ approach will no doubt reap long term dividends for those people who take a stake in the company – with the payout potentially running into thousands of pounds.

So what’s different now to 1986 when this all got underway? In many ways we’re seeing the same issues. Driven through by a Conservative led government Unions are unhappy with the fact that services are being taken out of the public sector and delivered into private hands. Labour say the move is out of touch given that the government had taken on pension liabilities. Meanwhile the prospect of strike action also looms large, but perhaps that’s an issue for another day.

As in 1986 the UK economy in 2013 is making slow recovery from a deep recession with high unemployment still making headlines. Then as now the government was trying to stimulate the economy but did not have the resources to invest in its own assets. Where things have changed now is that the public is used to the idea of privatisations and can see that when run well companies can and do perform at higher levels. The reason given for the Royal Mail sell-off is to allow private sector capital to flow into the business to allow the cash injection to kick start a new era for both Royal Mail and its staff.

The idea of giving staff a real stake in the new business is a potentially shrewd (albeit not unknown) move which may win over some of the cynics and critics who reason the sell-off cannot be made to work. What is clear, though, is that the great Royal Mail share giveaway will reignite the national debate on shareholding and will doubtless attract a new generation of investors in what will be a very public sell-off.

Do you think the Royal Mail sell-off will be good for the business? Did you buy shares in previous nationalisations or are you considering becoming an investor for the very first time? Let us know in the comments section below…

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