3 December 1984: BT is sold off in a gamble over privatisation

In a landmark test of privatisation, the government sold off over half its stake in British Telecom, on this day in 1984.

These days, it's easy to forget just how revolutionary the idea of privatisation was at the end of the 1970s and the beginning of the 1980s. According to the Institute for Government, the word privatisation' was invented by David Howell, a minister in Margaret Thatcher's cabinet, because the government thought denationalisation' sounded too negative.

Thatcher was flushed with election victory in 1979 when she set about deregulating markets and making public corporations more competitive. But British Telecom (BT) was massive. Nobody was quite sure how privatising a business of that size would work. As BT puts it, the sale "was revolutionary in its scale and experimental in its marketing. Ultimately, it was not just British Telecom that was being sold, but the whole concept of privatisation."

In 1981, the British Telecommunications Act split off BT from the Post Office, and the telecoms sector was opened up to competition. Then in July 1982, the government announced it intended to sell over half its stake in the company.

After a second election victory the following year, the government pressed on with its plans. The sale, it was hoped, would promote share ownership among the general public. But, as BT explains, "it had the added benefit of positively contributing to the Public Sector Borrowing Requirement (PSBR)". So long as the government had a less than 50% stake in BT, "any future capital borrowed is exempt from the PSBR, a figure the Conservatives were keen to reduce".

In November 1984, over three million shares were offered 50.2% of the business with 34.3% earmarked for the general public. By the time the deadline expired, the shares had been oversubscribed by 3.2 times. Trading began on 3 December, raising £3.9bn for the Exchequer.

Not everybody was happy. The Labour party was opposed to privatisation, and former Conservative prime minister Harold Macmillan compared it to selling off the family silver. The media complained the shares had been priced too low at 130p. The government explained this had been done intentionally in the interests of promoting share ownership. Either way, the genie was out of the bottle. Privatisation came to be seen as one of the defining policies of the Thatcher era.

Recommended

How to make sure your business doesn't lose out in lockdown
Small business

How to make sure your business doesn't lose out in lockdown

Money is still available via government schemes to help small companies cope with the latest Covid restrictions. David Prosser outlines what you can g…
16 Jan 2021
Leasehold reforms promise the end of a nightmare for many homeowners
Property

Leasehold reforms promise the end of a nightmare for many homeowners

Horror stories about unscrupulous landlords profiting from a legal relic of the feudal era are about to get a happy ending, says Simon Wilson.
16 Jan 2021
Volatile Christmas trading leaves more of a mess at retailer M&S
UK stockmarkets

Volatile Christmas trading leaves more of a mess at retailer M&S

Last year was grim for retailers, while M&S, the clothing sector’s chronic underperformer, struggled at Christmas too. Matthew Partridge reports.
15 Jan 2021
Share tips of the week
Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
15 Jan 2021

Most Popular

A simple way to profit from the next big trend change in the markets
Investment strategy

A simple way to profit from the next big trend change in the markets

Change is coming to the markets as the tech-stock bull market of the 2010s is replaced by a new cycle of rising commodity prices. John Stepek explains…
14 Jan 2021
Forget austerity – governments and central banks have no intention of cutting back
Global Economy

Forget austerity – governments and central banks have no intention of cutting back

Once the pandemic is over will we return to an era of austerity to pay for all the stimulus? Not likely, says John Stepek. The money will continue to …
15 Jan 2021
Here’s why markets have shrugged off the US political turmoil
Investment strategy

Here’s why markets have shrugged off the US political turmoil

Despite all the current political shenanigans in the US, markets couldn’t seem to care less. John Stepek explains why, and what it means for your mone…
7 Jan 2021
Free 6 issue trial then continue to