Wednesday, 27 August 2014

Privatisation: what is it?


Royal Mail- the latest major privatisation. 
Privatisation: it's been a contentious issue in the UK, especially since the Thatcher era. It's salvation to some, a criminal act to others.

Thatcher, guided by the principles of free-market, non-interventionist saint Friedrich Hayek, led the privatisation of over 50 British public sector companies- notably British Gas, British Telecom (BT) and British Leyland (see, the names all make sense now). It's interesting how privatisation has integrated into our society over the last 30 years or so- while there was outroar from many when Thatcher privatised utility, automotive, financial industries and so on, nowadays it's difficult for much of the youth to believe that companies like BT, Jaguar and British Airways could be owned by their government.

So what is privatisation? It's a relatively simple concept to explain- there are various particular types of it, but privatisation is essentially the transfer of public, nationally owned assets (companies in this case) into private hands, which can be via sale, like we saw recently with Royal Mail.
Royal Mail was until recently a public sector company, essentially run by the government- but in October 2013 the company was broken up into shares and sold on the stock exchange (it was later
discovered to have been shockingly undervalued). It was open to investment from anyone.
A portion of the Royal Mail is still owned by the government via an intermediary, 10% by its 150,000 staff, and significant amounts are owned by foreign state-backed organisations from countries such as Kuwait and Singapore.

So, that's a basic introduction to privatisation- but stick around for a more detailed evaluation of the benefits and negatives of this controversial transformation. It'll certainly be an interesting ride.

SOURCES (and recommended reads): 
Margaret Thatcher: one policy that led to more than 50 companies being sold or privatised http://www.telegraph.co.uk/finance/comment/alistair-osborne/9980292/Margaret-Thatcher-one-policy-that-led-to-more-than-50-companies-being-sold-or-privatised.html
Royal Mail: Government of SINGAPORE is the second biggest private owner of our postal service
http://www.mirror.co.uk/money/city-news/singapore-governments-sovereign-wealth-fund-2558278#ixzz3BaHXfUtW 

Royal Mail: Sovereign Funds To Get Shares

http://news.sky.com/story/1152622/royal-mail-sovereign-funds-to-get-shares


Mohammad Lone Editor