Lord Myners calls for more transparency after Royal Mail sale

Lord Myners said in his report that the £2bn sale of the postal service could have been increased by between 20p and 30p per share, adding £120m to £180m to the overall value

A postman delivers letters in Hornchurch, Essex, UK
The Government sold a 60pc stake in Royal Mail in October at 330p per share Credit: Photo: Bloomberg News

More flexibility and transparency is needed when carrying out privatisations of public companies to avoid the kind of controversy that followed the flotation of Royal Mail, a former City minister has said.

Lord Myners found that Vince Cable, the Business Secretary, and his department had made “the right decisions” during the Royal Mail sale but he called for more flexible pricing, greater transparency during the sale process and more information for potential shareholders.

Lord Myners said in his report that the £2bn sale of the postal service could have been increased by between 20p and 30p per share, adding £120m to £180m to the overall value. This sum is much smaller than the National Audit Office’s claim in April that the state missed out on £750m.

The Government sold a 60pc stake in Royal Mail in October at 330p per share. It drew criticism after the share price jumped above 600p in the early weeks of trading and several large investors sold out despite pledging to be long-term stewards of the firm.

Lord Myners said these shareholders could have been bound to hold shares through lock-up periods, but that would have come with a discounted share price that lost the taxpayer some of the IPO proceeds. The shares have fallen back to the 400p mark, which Mr Cable said vindicated the initial price. “I welcome [Lord Myners’] comment that the sale was executed with considerable professionalism and that any decision to try to have priced the shares higher would have been risky. We were right not to take that risk,” he said.

Chuka Umunna, Labour’s shadow business secretary, said the report showed that the state had been “disgracefully short-changed” and that the report had not looked into the value of Royal Mail’s property.

Share demand was fierce during the early work to line up big shareholders, known as bookbuilding, but the Government did not move the price beyond the 260p to 330p range set by its investment banks working on the IPO.

Lord Myners called for a more transparent way of allocating shares rather than the traditional bookbuilding that can favour business relationships over the order price. The adoption across the market of online auctions should help make the process clearer, he added.