Modest returns for many investors

Enormous profits have been made on privatisation stocks over the years. But British Gas, the company that made fat cats famous, actually showed a negative return to shareholders of 13 per cent over the past year as concern grew about rising competition and falling prices.

The total return to gas shareholders since privatisation, including reinvested dividends, is also modest compared with gains made in a much shorter period by electricity and water company shareholders.

Another privatisation investment to show a negative return last year was BT, largely because of City concern at increasingly tough regulation.

Although all the other privatisation stocks showed positive total returns last year, many fell below the average 24 per cent gain made by investors in FT-SE 100 stocks during 1995.

Outside the water and electricity industry, only BP and British Airways beat the average gain and Cable & Wireless matched it. Poor performers in relative terms include Amersham International, BAA, Enterprise Oil and Rolls-Royce. Where companies were sold in more than one go, gains are shown from the earliest date.

Several water companies outpaced the market's hundred biggest companies, while Northumbrian Water, which yesterday formally fell under the control of Lyonnaise des Eaux, gained 64 per cent during 1995. Its shareholders are showing the largest overall gains for a water company since privatisation.

None of the electricity companies did as well in 1995, partly because the big run-up in power company share prices occurred the year before as a result of a lenient electricity price review combined with growing speculation about bids.

The total returns for regional electricity companies shown in the table are adjusted to include special dividends and capital changes such as share buybacks, and to allow for the demerger and flotation of National Grid earlier this month. Some companies have already been taken over and are about to lose their Stock Exchange quotations.