Thursday 16 October 2014

Government Reveals Plan to Sell off the UK's 40% Stake in Eurostar

George Osborne is to announce on Monday that the government is selling its 40% stake in Eurostar before the election.

Eurostar trains at St Pancras Station London
The chancellor will say he is looking for bids by the end of the month and is hopeful the privatisation of the Channel tunnel train operator will raise up to £300m.
Britain has part-owned Eurostar for the past 20 years, but according to Osborne the sale is part of the Treasury’s plan to reduce the national debt by offloading state assets.
He will say: “I am determined that we go on making the decisions to reform the British economy and tackle our debts. So we will proceed with the potential sale of the UK’s shareholding in Eurostar today.
“Ensuring we can deliver the best quality infrastructure for Britain and the best value for money for the taxpayer are key parts of our long-term economic plan.
“As part of our aim to achieve £20bn from asset sales by 2020, the sale proceeds would make an important contribution to the task of reducing the public sector debt.”
This year Osborne has been busy selling the government’s large minority stake in Lloyds bank to claw back some of the losses dating back to its rescue in 2008, though he has abandoned plans for an open public sale before the election, preferring piecemeal offers to private City institutions.
He will be hoping to avoid a repetition of the Royal Mail debacle, when the government came under heavy fire for selling a large stake for a fraction of its later value, handing huge profits to institutions involved in the sale.
The French state-owned railway company, SNCF, owns 55% of Eurostar, while the state-owned Belgian company, SNCB, owns the remaining 5%.
SNCF has indicated that it is not interested in buying Britain’s stake but has a “last look” right that would allow it to come in at the end of the bidding process and pick up the holding at a 15% premium.
Pension companies, investment funds and infrastructure funds are seen as the likeliest bidders, with the UK government hopeful that the sale will be completed in the first quarter of 2015.
The proposed sell-off comes at a time of debate about private versus public ownership of Britain’s railways amid concern about fare prices and quality of services. Unions voiced strong opposition to the idea of the Eurostar sell-off when it was first floated in the 2013 autumn statement.
Eurostar, which links St Pancras International in London with destinations in France and Belgium, has been enjoying record passenger numbers and has ordered a fleet of new high-speed trains, which will be able to reach speeds of up to 199mph (320km/h).
As Britain’s first custom-built high-speed rail line, it has carried more than 145 million passengers since its services through the Channel tunnel began in 1994. The success of Eurostar has encouraged the government to build a second high-speed line linking London with cities in the Midlands and the north.
Originally a partnership between SNCF, SNCB and British Rail, Eurostar became a single, unified corporate entity in 2010. Britain’s stake, held by London and Continental Railways after BR’s privatisation, passed to the Treasury this year.
The company made a profit of £18.6m in 2013, of which the Treasury received £7.4m. That was up on the £6.5m from profits of £16.3m in 2012.
Osborne is being advised on the sale by the Swiss bank UBS, but is reserving the right not to go ahead if the bids are not high enough.
The Treasury said it wanted to ensure that the taxpayer got value for money from the deal and expects there to be several rounds of bidding before an eventual purchaser for the stake emerges.
The sale will lead to a small reduction in Britain’s £1.4tn national debt but will not affect the government’s preferred measure of the budget deficit, public sector net borrowing.
Other state-owned assets being lined up for sale include the legacy Royal Mail pension assets, the uranium enrichment company Urenco, the income-contingent student loan book and further public sector wireless communication spectrum.