Royal Mail ‘sold cheap’ claim as shares hugely over-subscribed

Royal Mail is making its stock market debut
Royal Mail is making its stock market debut

Demand for Royal Mail shares from private investors has outstripped supply sevenfold, Business Secretary Vince Cable has revealed.

The Minister said around 700,000 applications had been made by Tuesday’s deadline, which he believed showed the high level of interest in the controversial privatisation.

He was speaking as postal workers staged a protest outside Parliament over the sell-off. Activists dressed up as highway robbers, carrying banners saying “The Great British Royal Mail Robbery” to mark Mr Cable’s session before the Business, Innovation and Skills Committee.

MPs had earlier voiced fresh concern that the Government’s privatisation of the Royal Mail will be “highly lucrative” for speculators, hedge funds and investment banks rather than the public.

Only around 30 per cent of shares have been set aside for the so-called retail shares, with others going to institutional investors and staff.

Labour and the unions have warned the Government it is selling the postal operator too cheaply, amid predictions of huge profits by investors. Last week, investment firm Panmure Gordon said Royal Mail was being undervalued by £1bn.

Mr Cable had, however, warned Labour that its opposition to the sale was “irresponsible”, adding it was “dangerous” to imply there was an easy bargain to be made.

Conditional trading of shares will start tomorrow and full trading next Tuesday, a day before the result of a strike ballot by the Communication Workers Union.

Royal Mail staff have opted overwhelmingly to accept a free share offer. It is believed that just 368 of the Royal Mail’s 150,000 staff, 0.25 per cent, have declined free shares – worth up to a reported £2,000 – in the privatised company.

CWU members are expected to back industrial action, with any strike set to be held on or after October 23 – the run-up to the busy Christmas period. The Union said it had never told its members not to accept the free shares, adding that it did not mean they agreed with the privatisation.

Mr Cable faced tough questions from members of the Business Select Committee yesterday.

Committee chairman Adrian Bailey said the Minister was overseeing the sale of a profitable, popular, publicly-owned company to financial institutions he had criticised in the past.

Mr Cable said he was “very comfortable” with the sale, stressing the Government wanted to secure a “long term, responsible” investor base from organisations such as pension funds.

An Early Day Motion was earlier tabled by the SDLP, calling on the coalition to review its decision, warning that the commitment to deliver mail six days a week could be “watered down”.

In written evidence to the Select Committee, the Government said the Royal Mail was on the road to sustainability, with an increase in its operating profit to £403.

“Royal Mail must continue the process of modernisation and transformation, and must be able to invest to grasp new business opportunities,” said the Government.

Mario Dunn, campaign director for Save Our Royal Mail, said: “Vince Cable was unable to reassure customers that Royal Mail would not eventually cut back on rural services nor increase prices disproportionately. This privatisation marks the beginning of the end of the postal service as we know it.”

Billy Hayes, general secretary of the CWU, said: “It’s no surprise that the Government has sold the postal service cheap to its friends in the City.

“The public didn’t want the service sold and will get a worse service as customers. Now they also know they are getting a bad deal as taxpayers too.”