James Moore: Robin Hood in reverse – poor are set to suffer as Royal Mail floats

Outlook: Critics of the planned listing reckon valuation could be £1.2bn light

Royal Mail is the Robin Hood-in-reverse flotation, taking money from the poorest in society and handing it to the rich. This is not an exaggeration, nor do I intend to indulge in a piece of left-wing polemic. It’s just a fact. Here’s how you get there.

Your starter for ten is that the business has been woefully under-priced by the terrible twosome of Goldman Sachs and UBS, which stand to share in upwards of £20m in fees along with a battery of well-paid lawyers, PR consultants, accountants and other City flunkies (which is a substantial state-funded gravy train to begin with).

In fact, Panmure Gordon, the stockbroker, reckons that the official valuation of up to £3.3bn could be as much as £1.2bn light based on what other countries’ (mostly private) postal services are worth. It has also been argued, by Labour’s Chuka Umunna that the group’s property assets, a number of which are surplus to requirements, aren’t being properly reflected in the price at which the company is being sold off.

If you’re going to sell something to investors via the stock market, you have to let it go at a bit of a discount. Valuations are always open to debate. Put two analysts in the room and give them a company like this, and they’ll give you three or four different estimates for how much they think it’s worth.

However, there does seem to be a consensus emerging that people who subscribe for shares in Royal Mail are being offered an extraordinarily good deal even if the shares go at the top of the valuation range.

If you want evidence for that, just look at the demand. City investors don’t fall over themselves to get involved if they feel they’re being sold a pup. This is no pup. The queue of institutions stretches from the City, past Westminster and on into Mayfair and Kensington. Institutional fund managers love to play with loaded dice, and that is what the Government has handed them.

But it gets worse than that. Forgotten in all the fuss about the valuation yesterday is the fact that this is only happening because the Government took the Royal Mail’s under-funded pension scheme on to its books. That meant £28.5bn of assets (hooray) but long-term liabilities of up to £10bn more (boo). Even were the Government to revisit its valuation and get something close to the £4bn Panmure thinks the Royal Mail in its current shape is worth, taxpayers would still be losing out massively as a result of this.

A minority of the shares, it is true, have been allocated to retail investors. So relax. We can at least join the fun. But tickets for the cheap seats start at £750.  

The City, meanwhile, will be travelling in club class. And the poor? Those who have disproportionately suffered from the financial crisis, the economic slowdown and the austerity that has followed on from it? As they tend to be generally more reliant on the state’s support than the wealthy, they are the big losers. As ever.

Retail recovery may  face new blows yet

Following on from downbeat data on footfall come today’s figures on retail sales from the British Retail Consortium.

They show that sales are still growing but only just, and were it not for the ever-buoyant online channel, certain categories of product would have gone into reverse. It’s also worth remembering that inflation plays a role in bolstering these figures.

In other words, the recovery of the sector is built on straw. Even a gentle breeze could push it over, and the continuing shutdown of the US government could provide more than just a breeze if it isn’t sorted out before too long. It isn’t just the American economy the Republicans are holding to ransom.

Windfalls, such as compensation from mis-sold payment protection insurance, have helped to bolster sales but they are coming to an end.

There may be a few more to come if people pocket a quick buck from the Royal Mail privatisation. But retailers know they have no reason to sleep easy. Living standards are still falling. For the sector to keep its green shoots from being strangled by a winter frost, it will have to continue pricing keenly.

The lack of pricing power ought to be good news for shoppers. It’s even better news for the Bank of England, where monetary policymakers will enjoy a happy Christmas only if inflation continues to be kept at bay.

China cools but Burberry has other irons in the fire

One retailer whose bubble appears to have burst is Burberry, at least if you were listening to its boss Angela Ahrendts, who warned in an interview with a French newspaper the luxury slowdown in China may be long-term.

Economic growth this year was just 7.5 per cent – poor China – and it seems conspicuous consumption is no longer cool. So no more wandering around flashing pricey designer labels for the beneficiaries of that nation’s spectacular boom.

The stock market took heed and marked the shares down. A bit. But they’ve been frothy for quite a while now. Like China’s economy, Burberry’s share-price growth might be a bit more modest from here on out, but there’s still plenty for it to shoot for. Latin America, Indonesia, who knows, before too long there may even be parts of Africa with enough newly minted people to pay through the nose for what Burberry sells so they can show it off. That would represent progress, at least of a kind.

And to think, they used to get all worried about football fans wearing cheap knock-offs. Today’s Burberry, with its eyes focused East, South and South West, would probably barely notice.

PROMOTED VIDEO
Life and Style
Upright, everything’s all right (to a point): remaining on one’s feet has its health benefits – though in moderation
HealthIf sitting is bad for your health, what happens when you stay on your feet for a whole month?
News
Kristen Stewart and Rupert Sanders were pictured embracing in 2012
people
News
President Obama, one of the more enthusiastic users of the fist bump
scienceBumping fists rather than shaking hands could reduce the spread of infectious diseases, it is claimed
Sport
Laura Trott with her gold
Commonwealth Games
Arts and Entertainment
Gal Gadot as Wonder Woman
arts + ents
News
Bryan had a bracelet given to him by his late father stolen during the raid
people
Arts and Entertainment
Chris Pratt stars in Guardians of the Galaxy
arts + ents
Arts and Entertainment
Pedro Pascal gives a weird look at the camera in the blooper reel
arts + entsPrince Oberyn nearly sets himself on fire with a flaming torch
News
Danny Nickerson, 6, has received 15,000 cards and presents from well-wishers around the world
newsDanny loves to see his name on paper, so his mother put out a request for cards - it went viral
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
France striker Loic Remy
sportThe QPR striker flew to Boston earlier in the week to complete deal
News
Orville and Keith Harris. He covered up his condition by getting people to read out scripts to him
People
Arts and Entertainment
Zoe Saldana stars in this summer's big hope Guardians of the Galaxy
filmHollywood's summer blockbusters are no longer money-spinners
Arts and Entertainment
O'Shaughnessy pictured at the Unicorn Theatre in London
tvFiona O'Shaughnessy explains where she ends and her strange and wonderful character begins
Life and Style
Workers in Seattle are paid 100 times as much as workers in Bangladesh
fashionSeattle company lets customers create their own clothes, then click 'buy' and wait for delivery
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Training/Learning and Development Coordinator -London

£28000 - £32000 per annum: Ashdown Group: Training/Learning and Development Co...

Training Programme Manager (Learning and Development)-London

£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...

.NET Software Developer (.NET, C#, ASP.NET, front-end)

£30000 - £45000 per annum: Harrington Starr: A Global Financial Service Organi...

C# Web developer (C#,MVC,ASP.NET,SQL)

£30000 - £40000 per annum + Bonus+Benefits+Package: Harrington Starr: C# Web d...

Day In a Page

A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on
It's the best of British art... but not all is on display

It's the best of British art... but not all is on display

Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
Critic claims 'I was the inspiration for Blanche DuBois'

Critic claims 'I was the inspiration for Blanche DuBois'

Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
Sometimes it's hard to be a literary novelist

Sometimes it's hard to be a literary novelist

Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

Edinburgh Fringe 2014

The comedy highlights, from Bridget Christie to Jack Dee
Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

The woman stepping down as chair of the Heritage Lottery Fund is worried