The Chancellor has decided to stop the plans for a retail share sale of NatWest. Rachel Reeves called the previous government’s proposal a “bad use of taxpayer money”.
Instead, the government will sell shares to large institutional investors, aiming for full privatization of NatWest by 2025-26. This decision reflects a significant shift from the earlier strategy designed to attract everyday investors.
Chancellor Scraps Retail Share Sale Plans
The Chancellor has decided to halt the retail share sale plans for NatWest. Rachel Reeves referred to the previous plans as a “bad use of taxpayer money”.
The former Conservative administration had proposed selling shares to ordinary investors at a discount, supported by an extensive advertising campaign. The idea was to mimic the ‘Tell Sid’ campaign from the 1980s.
Reasons Behind the Decision
Reeves highlighted that selling shares at a discount could cost taxpayers up to £450 million. She stated that such a strategy would not provide value for money and decided against proceeding with the retail share sale.
The chancellor added that the government aims to return NatWest to full private ownership by 2025-26. Therefore, the shares will be sold to large institutional investors instead.
Previous Government’s Proposal
The previous administration’s plan included a mass-market sale targeting everyday investors. The shares would have been offered at a lower price to attract more buyers.
An advertising campaign, similar to the ‘Tell Sid’ push used during British Gas’s denationalisation, was planned. The initiative aimed to make the sale appealing to the public.
NatWest’s History and State Involvement
NatWest, previously known as Royal Bank of Scotland, was bailed out during the 2008 financial crisis. The government invested £46 billion of public money to rescue the bank.
At one point, the state owned 84% of NatWest. Over the years, the Treasury has been gradually selling its stake, reducing state ownership to below 20% recently.
The retail share sale was expected to involve significant discounts, leading to an estimated cost to taxpayers of £450 million.
Government’s Exit Strategy
The government remains committed to fully exiting its shareholding in NatWest by 2025-26. Reeves emphasised that selling shares to institutional investors is a more cost-effective approach.
Reeves’ decision was based on advice that highlighted potential financial losses from a discounted retail sale. She described the proposed sale as not representing value for money.
NatWest’s Response
NatWest has welcomed the government’s decision. A spokesperson stated that returning to full private ownership is in the best interests of the bank and its shareholders.
The bank revealed it had already spent £24 million on the scrapped retail sale plans. This amount covered advertising, legal fees, and other expenses.
Some of the funds allocated for the retail sale will be repurposed for general advertising uses, adjusting the bank’s strategy accordingly.
Future Prospects for NatWest
The decision signals a shift in strategy, focusing on institutional investors instead of the general public. This approach is intended to minimise financial losses.
NatWest aims to stabilise its position and continue its operations without a significant stake held by the government. This move aligns with broader efforts to privatise the bank fully.
Observers will be watching closely to see how the bank performs in the absence of government ownership. The coming years will be crucial for NatWest’s future.
The decision to halt the retail share sale of NatWest marks a pragmatic shift in government policy. It aims to protect taxpayer money and achieve full privatisation by 2025-26.
Selling shares to institutional investors instead of the general public is expected to minimise financial losses. NatWest is now focused on stabilising its position and operating without significant state ownership.