NatWest public share sale scrapped, Reeves announces

Rachel Reeves has abandoned plans to sell the government’s remaining stake in NatWest to the public, saying it would not “represent value for money”.

The Labour chancellor said a retail share sale of the bank would now not happen as it would mean having to offer the public discounts worth hundreds of millions of pounds, which would be damaging for taxpayers.

The government has a 20% stake in the lender.

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A public sale would "not represent value for money, and it will not go ahead", she told MPs on Monday as part of a statement on public finances. She added: “It’s a bad use of taxpayer money and we will not do it."

Within that speech Reeves announced cuts to public spending worth billions of pounds, including restricting winter fuel payments to those on pension credit or other means-tested benefits.

Sarah Coles, head of personal finance at Hargreaves Lansdown, says: “The news that retail investors will be frozen out as NatWest shares are sold off is bitterly disappointing. Retail investors are all too often overlooked and yet they are important backers of UK companies, holding a greater proportion of their assets in the UK compared to the likes of pension funds.”

Postponement comes after NatWest beats expectations

The abandonment comes after profits at NatWest surpassed expectations in the three months to the end of June, pushing the share price of the state-backed lender more than 8% higher during early trading on Friday.

NatWest, which has been one of the FTSE 100’s best-performing stocks this year, notched up profits of £1.7 billion during the quarter, beating forecasts of £1.3 billion.

Within those results the bank, which was at one stage 84% owned by the state after a £46 billion bailout at the height of the financial crisis, also revealed it had spent £24 million on the previously shelved Tory government plans for a 'Tell Sid'-style public share sale. The costs were racked up to pay for advertising and preparations for sale, which had been due to launch in the summer before the surprise 4 July election announcement.

Earlier last week, high street bank TSB, which is part of Spain's Banco Sabadell, posted pre-tax profits of £111.6 million during the period, down 24.5% against the same six months a year earlier.

TSB said income was impacted by lower mortgage margins due to "challenging" market conditions in the face of high interest rates, while the company also paid out significantly more interest to its savings customers.

UK interest rates are currently sitting at a 16-year high of 5.25%, meaning mortgage rates remain high. As a result industry body UK Finance said that it expects total lending for house purchases to fall by a further 8% this year to £120 billion.

James Tatch, head of analytics at UK Finance, says: “We expect lending to remain weak in 2024, with a gradual improvement in affordability reflected in a modest increase in activity levels in 2025.”