Chancellor Philip Hammond has scrapped plans for the government to sell its remaining stake in Lloyds Banking Group at a discount to the general public.
Speaking in Washington, Mr Hammond announced the government will shun retail investors and instead will sell its remaining 9.1% stake in the bank (worth £3.1 billion before the announcement was made) on the open market, phasing the sale over the next 12 months.
Until today, the UK government was planning to sell its final chunk of Lloyds to the public at a discount, once the share price reached around 75p.
But since the UK’s decision to leave the EU, as well as the Bank of England’s latest rate cut to 0.25%, Lloyds share price has performed poorly, slumping from around 70p a share to 55p a share.
As a result, the government will generate a much better return for the taxpayer by drip-feeding its remaining shares to the market.
UK Financial Investments, which is responsible for the government’s holdings in RBS and Lloyds, had advised the Chancellor: “Putting in place a further trading plan represents the best opportunity to sell shares at a price which delivers value for money for the taxpayer.”
Mr Hammond says: “Returning Lloyds to the private sector is in the interests of the bank, taxpayers and the country as a whole. That is why exiting our stake in Lloyds in an orderly way and at the best possible price is one of my top priorities as Chancellor.
“I have listened to the experts. Ongoing market volatility means it is not the right time for a retail offer.
“Our plan will get back all the cash taxpayers invested in Lloyds during the financial crisis and leave the bank in a better place to continue the crucial role it plays in supporting individuals, families and businesses up and down the UK.”
Following the announcement Lloyds’ share price fell to 52.9p at the time of writing, some 3.8% lower than at the open of trading this morning.