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Home Banking NatWest share sale is put on hold while data shows how privatisations kickstarted new investment habits

NatWest share sale is put on hold while data shows how privatisations kickstarted new investment habits

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Susannah Streeter
  • The government plan to sell off the remaining shares in NatWest is on hold, due to the General Election campaign.
  • 25% of people say they invested in privatisations between the late 1970s and 2014.
  • Of this group, a third of people (34%) of people still hold at least one of the companies they invested in.
  • For 21% it was a gateway to investment – and they built a portfolio of investments.
  • Almost two in five (38%), took advantage of the scheme but then sold up without going any further on their investment journey.

Figures from a survey of 2,000 people by Opinium for HL in April 2024, unless otherwise stated.

Susannah Streeter, head of money and markets Hargreaves Lansdown:

‘’The NatWest share sale, announced by Chancellor Jeremy Hunt, has been put on ice, due to the General Election campaign. The Spring Budget 2024 set out that a sale would take place this summer at the earliest, subject to supportive market conditions and achieving value for money for the taxpayer. But now the retail offer will not happen during the election period.

Schemes like this have the power to encourage new investors, so it’s hoped this will be revisited by whoever wins the election.

Past privatisation schemes, brought in newcomers and super-charged investing habits for many novice shareholders, but others refrained from dipping their toe further into the market, and heightened interest in the stock market ebbed away during following years.

With the scheme on hold but still a possibility, it’s worth looking at the investment lessons to take away from shareholder behaviour following previous privatisations, including the famous Tell Sid campaign promoting the British Gas share sale.

Privatisations sparked shareholding surge

Between the end of the 1970s, and when Margaret Thatcher was replaced as Prime Minister, more than 40 state-owned businesses were privatised. This included early sales like British Aerospace and Cable and Wireless in 1981, which were completed with little fanfare. Enthusiasm then built within government, so it became a campaign issue in the 1983 election, which ushered in a wave of privatisations, including BT, BP, British Airways, BAA, Powergen National Power and Severn Trent Water. These created millions of new shareholders, and shareholding went from being something for just 7% of the population in 1979 to 25% ten years later.

It was hoped this shift towards shareholding would accelerate further – but this didn’t play out. The number of Brits investing directly in the stock market has remained around a quarter and households hold less than 4% of their assets in shares. This compares poorly internationally, where the French, Danes, Germans and Spanish hold a larger proportion of their assets in shares. It’s dramatically less than the US, where 36% of household financial assets are in stocks – while shares are held by 61% of Americans.

Privatisations – a gateway to investment

For many of those who took part in privatisation schemes, it did kickstart better investing habits. Those who took advantage of privatisations are more likely to be investors now. Overall, 25% of people took part, but 44% of people who currently invest took advantage of the schemes back then. 25% of people invested in privatisations between the late 1970s and 2014 and for just over a quarter of them it was a gateway to investment – and they built a portfolio of investments. Of the people who bought into a privatisation, a third of people (34%) still hold at least one of the companies they invested in. The higher someone’s income is today, the more likely they were to have participated – despite the fact the boom ended more than a decade ago, when their income may have been far lower. 69% of additional rate taxpayers participated, 49% of higher rate taxpayers and 23% of basic rate taxpayers.

Additional rate taxpayers are more likely to still hold them – 48% of those who took part still hold at least one of the shares, compared to 42% of higher rate taxpayers and 33% of basic rate taxpayers.

Missed opportunity

However, a big chunk of people, two in five (38%), took advantage of the initial privatisation schemes but then sold up without going further on their investment journey.  This is a big, missed opportunity to boost future financial resilience, particularly when tax-wrappers like Stocks and Shares ISAs, JISAs (Junior ISAs), LISAs (Lifetime ISAs) can be used to ringfence investments and boost returns. Starting out with a handful of interesting shares and then broadening to a wide portfolio of funds in ISAs can help provide the backbone of long-term financial strategy. When we eventually get any NatWest share sale, it should be viewed as an opportunity to spread awareness about the importance of diversification, not putting too many eggs in one basket and also to have an eye on a long-term horizon for any investment strategy. There is still considerable value in London-listed companies to be unlocked. Although the FTSE 100 has reached record gains recently, the number of overseas firms still circulating potential targets on the LSE, is an indication that UK assets are considered cheap compared to peers overseas.”

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