Comment: Royal Mail may have been sold too cheaply

Martin Flanagan. Picture: Adrian Lourie
Martin Flanagan. Picture: Adrian Lourie
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THE government, accused of selling the Royal Mail on the cheap, could be forgiven ambivalence on more than doubling interim profits in the state-owned postal group’s swansong.

Critics say it gives the lie to government claims that a shaken-up, streamlined Royal Mail could not have continued to make a go of it in the public sector rather than becoming the possession of City institutional investors and hedge funds at a knockdown stock market price.

The stock added nearly another 6 per cent in value yesterday, taking the shares to about 70 per cent above their flotation price.

Business Secretary Vince Cable was in defensive mode on the float again yesterday, telling members of the House of Commons business select committee that it would take time for the Royal Mail’s decidedly frisky share price to settle down.

Cable has previously labelled big gains in the share price soon after the float as “froth”. Well, it is proving highly tensile froth. The good trading performance at Royal Mail in the first half undoubtedly has much to do with chief executive Moya Greene’s rationalisation of the organisation in recent years to make it function with far greater efficiency.

And the rising pressure from rival mail organisations is not going to go away whatever the antediluvian industrial action by Royal Mail workers.

So this is not an argument against privatisation of the organisation. But such a trading performance in its final period in sole state ownership, with the Royal Mail on the brink of entering the blue-chip FTSE 100 index, does again beg the question whether the government was determined make the public listing a public relations “success”, and that they, with the help of their investment banker advisers, instinctively under-priced it accordingly.

With each passing week, and with the Royal Mail price continuing to head north, the suspicion grows stronger that a chance was missed to add many hundreds of millions of pounds to Britain’s impoverished public coffers.

SFO interest means shift in RBS criticism

SO, THE Serious Fraud Office is reportedly looking at whether Royal Bank of Scotland deliberately undermined viable small businesses, which would raise the possibility of a criminal inquiry.

If true, it certainly moves things on from Sir Andrew Large’s independent report into RBS small business lending. Large suggested RBS business managers were often less than competent operators; not unethical, or even illegal, ones.

The SFO line is that it is “aware of the issue and monitoring developments” at RBS. The weakness in the allegations is that they look anecdotal.

But it would be ironic if while a distressed RBS was repairing its own balance sheet, some of its managers had been playing with a rigged deck with its business clients.