George Osborne postpones Lloyds Banking Group share sale on the back of the market turmoil

28th January 2016

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In the wake of the turmoil gripping international stockmarkets, the chancellor George Osborne has postponed the sale of the Government’s final stake in Lloyds Banking Group, according to BBC News.

Speaking to the BBC’s economics editor Kamal Ahmed, George Osborne said he would not give the go-ahead until the markets had calmed, saying that “now is not the right time”.

The chancellor added that he was still committed to encouraging wider share ownership across the UK.

Osborne announced the details of the sale to small investors last October. The sale of the government’s final stake, which was penciled in to happen sometime in the spring, was expected to raise some £2bn, making it one of the biggest privatisations in the UK since the 1980s.

Under the terms, members of the public would be offered a discount of 5% of the market price, with a bonus share for every 10 shares for those who hold their investment for more than a year.

The value of the bonus share incentive would be capped at £200 per investor and those applying for investments of less than £1,000 would be prioritised.

‪Laith Khalaf, senior analyst at Hargreaves Lansdown believes the news will be a big disappointment for the hundreds of thousands of investors who had queued up for a chunk of Lloyds, but he added that taking a big loss on selling shares when markets are low was always going to be “a bridge too far for the Chancellor”.

‪He said: “The fall in the Lloyds share price has left them around 10p below what the government thinks it needs to break even, and together with the planned 5% discount and bonus share scheme would have meant the Chancellor putting his hand in his pocket, so now he looks to be pinning his hopes on a recovery in markets later in the year.”

Lloyds was bailed out by the government back in 2008 during the financial crisis. The Treasury originally had a 43% stake in the bank but it has since been offloading its holding by selling shares to institutional investors. Today the stake is less than 10%.

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