First sale of government stake in Lloyds is a success

But can private investors cash in on the deal?

Just a few days ago the government formally announced the imminent stock market flotation of state-owned British postal stalwart Royal Mail, as discussed by Spear’s last week.

In a move reminiscent of the mass privatisation of the Thatcherite era, this week the sale of another major organisation – albeit only part-owned by the state – has begun. Earlier this morning it was announced that the initial sale of taxpayer-owned shares in Lloyds Banking Group to institutional investors has raised £3.2 billion for the Treasury, representing a small profit (but not after inflation).

However, unlike the case of Royal Mail’s whopping 378-year-long history of complete state ownership, the government has only owned just over a third (38.7 per cent) of Lloyds Banking Group for the past five years, following its £20bn bailout of the failing bank in 2008 as a result of the Lloyds’ disastrous acquisition of Halifax Bank of Scotland.

The government is selling a 6 per cent share of it stake, reducing its ownership of the bank to around 32.7 per cent. While this may appear to be a small chunk of its holding, the Coalition can hope to cash £3.3 bn for the benefit of taxpayers on breaking the deal.

In a statement the Treasury said: "We want to get the best value for the taxpayer, maximise support for the economy and restore them to private ownership. The Government will only conclude a sale if these objectives are met."

Shares in Lloyds closed at 77.36p on Monday, which is well above the price of 61p that Chancellor George Osborne regards as the break-even level. During Lloyds' bailout the government bought shares at an average price of 73.6p.

Since the average market price at the time was 61p, the government booked the difference as a loss and added it to the national debt. BBC business editor Robert Peston says that based on Monday's share price the taxpayer should "more-or-less" get its money back.

The sale of this banking giant, laid low by the credit crunch, has been hailed as the UK’s second biggest share placing ever. It is, according to the Financial Times, not only a milestone in Lloyds’ recovery but also the sign of a momentous turnaround in the UK’s fortunes in the wake of the financial crisis, which brought the banking industry to the brink of collapse in October 2008.

The FT also reports that Lloyds’ shares, which are expected to be sold at 75p, have soared more than 90 per cent in the past 12 months, racing past the government’s 73.6p "in-price" for the first time in three years last month. It came as no surprise, therefore, that the government set the wheels in motion for the reprivatisation process.

And, naturally, investors are keen to muscle in on the action. The Capital markets bankers involved in the transaction reported a swift take-up of Lloyds shares, with one US hedge fund said to have submitted a $1bn order.

"Investors are making a call on the UK," said one banker on the deal. 'This level of demand would not be there if people weren’t confident in the UK’s broader economic recovery.'

The good news is that individual investors could also soon get their hands on some Lloyds shares, since the initial placement is expected to be followed by a second sale – potentially involving retail investors – in the first half of 2014.

Royal Mail’s flotation has created some interesting private investment opportunities through publicly traded shares, so let’s hope we can bank on getting access to some Lloyds stocks, too.

This piece first appeared on Spear's Magazine.

Lloyds TSB. Photograph: Getty Images

This is a story from the team at Spears magazine.

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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