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.

SEE ALSO:
BT is making progress and the dividend is back – but is it time to buy yet?

Recommended

Will energy prices go down in 2023?
Personal finance

Will energy prices go down in 2023?

The Energy Price Guarantee will now be extended, but how much will your gas and electricity cost you in 2023?
9 Dec 2022
What is an annuity?
Glossary

What is an annuity?

Annuities are growing in popularity as rates increase. But what is an annuity, and how do you get one?
9 Dec 2022
National Grid gets ready to pay households to cut energy use this weekend
Personal finance

National Grid gets ready to pay households to cut energy use this weekend

The cold weather and unfavourable wind conditions have raised concerns about electricity supplies, prompting the National Grid to consider paying hous…
9 Dec 2022
Asda cuts fuel prices by 5.5p a litre
Personal finance

Asda cuts fuel prices by 5.5p a litre

Asda is now selling the cheapest fuel. We look at if fuel prices are now set to come down further and how to save on costs.
9 Dec 2022

Most Popular

Is it cheaper to leave the heating on low all day?
Personal finance

Is it cheaper to leave the heating on low all day?

The weather is getting colder and energy bills are rising, but is it really cheaper to leave the heating on low all day or should you only turn it on …
1 Dec 2022
Radiator vs electric heater – which is cheaper?
Personal finance

Radiator vs electric heater – which is cheaper?

We compare the costs, pros and cons of radiators and electric heaters and see which one will help keep your energy bill as low as possible.
28 Nov 2022
The pros and cons of smart meters – should you switch?
Personal finance

The pros and cons of smart meters – should you switch?

A smart meter can help you keep tabs on your energy usage, but is it better than a regular meter? We take a look at smart meters vs regular meters.
2 Dec 2022