So much for the “long-term investors”, then. After an inordinate delay, the Business Secretary, Vince Cable, has seen fit to publish the names of the firms that effectively received preferential treatment in the flotation of Royal Mail last year. Some, such as the sovereign wealth funds, did at least fulfil the Government’s hopes that they would secure long-term partners in building the Royal Mail business – indeed constancy has been something of a feature of the Gulf States’ funds since their inception four decades ago.
However, other names on the list are less obviously faithful – as could have been predicted at the time. And so we learn that, of the 16 shareholders who were selected by Mr Cable for their “long-term investor potential”, and given vastly larger allotments than the £1,000-worth available to individuals, all but four sold out quickly. Rather than 22 per cent of the shares lying in such long-termist hands, only 12 per cent do now. The role of the investment bank Lazard Brothers – as advisor and priority investor – is another blot on the flotation.
There is a further point here, which adds to the impression of naivety on the part of ministers. It is simply this; why would you take the word of people Mr Cable might have dismissed in his past life as an opposition spokesman as “spivs”? What on earth came over the Business Secretary? Mr Cable should have known very well that, once shares in a public company have passed into the private sector, there is no way trade in them can be restricted. Had he wished to, it would have been relatively easy to place some sort of covenant on the shares, which would “lock-in” investors for at least the medium term. Many other large floats have done so. There are drawbacks with such a “hangover”, but if short-termism is such a strategic weakness in British business, and Mr Cable has identified it as such, then it might have been price worth paying.
As things stand, Mr Cable seems to have made a number of mistakes in the handling of the Royal Mail flotation. An apology may not be forthcoming given how far Mr Cable’s reputation is invested in the sell-off. Nevertheless, it appears some contrition is due.