Privatisation of Royal Mail

This note discusses the privatisation of Royal Mail.

The privatisation of Royal Mail has taken place in three parts – the majority of the company was disposed of in 2013, with 10% of shares allocated to an employee free offer and 60% sold to individuals and financial institutions.

The first sale of Royal Mail started in October 2013, with shares priced at £3.30 each – total proceeds of the first sale were £1,980 million. When markets opened following the sale, Royal Mail shares were valued at £4.50. Since then the share price has mostly ranged between about £4 and £6.

The sales of the remaining part started in June 2015. The final sale was completed in October 2015. Half of the remaining 30% of government owned shares after the first sale was sold on 10 June 2015 for a price of £5.00 a share, generating £750m with the second half sold on 13 October 2015 at a price of £4.55 a share, generating £591m. The government has said that this money will be used to reduce the national debt. The final sale also included a provision for 2% to go to Royal Mail employees. The total proceeds of privatisation has come to £3.3bn.

There were questions about the value achieved from the first flotation. The Business, Innovation, and Skills Committee report on Royal Mail Privatisation on 11 July 2014 concluded, “It is clear that the Government met its objectives in terms of delivering a privatised Royal Mail. However, it is not clear whether value for money was achieved; it appears that the taxpayer has missed out on significant value.” The National Audit Office (NAO) had similar conclusions: “Although the Department achieved its primary objective of delivering a sale of shares within this Parliament it could have achieved better value for the taxpayer.”

More background to the reform of postal services is given in the Standard Note Postal service reform 1997 to 2011. Further details on Royal Mail plc are in the Standard Note on Postal services: Royal Mail plc, which looks at the restructuring of Royal Mail in preparation for privatisation, the progress of modernisation and the impact on financial performance, the extent of competition, and the current regulatory framework.