Forty years ago, Margaret Thatcher was re-elected with a manifesto to sell off Britain’s state-owned monopolies to the public. She dreamed of turning ordinary citizens into an army of private shareholders, who owned and shared in the wealth of the UK’s biggest firms. Thatcher vowed no industry should remain in state ownership unless there was an overwhelming case for doing so.
Over the next few years, she fulfilled this pledge, selling BT, British Gas, British Airways and Rolls-Royce among others. Millions bought shares for the first time – and hundreds of thousands still hold them.
But how much would you have made if you invested when these firms were listed and if you still own the shares today?
Wealth & Personal Finance investigates which companies would have made you the biggest profits – and which are still worth buying or holding on to today.
How did margaret Thatcher’s vision play out?
Thatcher’s privatisation spree changed the face of investing in the UK – and the impact is still being felt today.
The lady’s for investing: Margaret Thatcher’s privatisations included British Gas, made famous by the Tell Sid campaign
‘Comparatively few people owned shares before the high-profile privatisations of the 1980s,’ says Lee Wild at investment platform Interactive Investor. ‘Selling off BT became the biggest catalyst for public share ownership and remains hugely significant to this day.’
Privatisation had already begun with the sell-off of BP and British Aerospace, but it was after Thatcher’s re-election on June 9, 1983 that it really got going. Within a year and a half, in November 1984, BT was listed on the stock exchange. Nearly 96 per cent of eligible BT employees became shareholders. The company now has more than 800,000 shareholders, many of whom have held shares since privatisation.
The BT sell-off was followed two years later in December 1986 by the flotation of British Gas, with an iconic advertising campaign called Tell Sid, which tempted one and a half million people to invest in its shares. The ads featured characters urging each other to ‘tell Sid’ – who remains unseen – about the chance to buy shares.
By the end of the 1980s, more than 20 per cent of UK adults held shares, up from 7 per cent a decade earlier.
Enthusiasts also bought shares in Britain’s ports, airports, steel makers, engineers and water suppliers when Associated British Ports, BAA, British Steel, Rolls-Royce, and all of Britain’s water companies were floated.
Over the years several of these companies, such as Amersham International (formerly the Radiochemical Centre) and British Steel, have been taken private or split into new companies. But some can still be invested in today.
The best and the worst performers
Investors in British Gas have been the big winners. An investor who bought £1,000 of shares in British Gas when it listed in 1986 would now hold shares worth £16,200.
British Gas has been demerged and bought over the years, so shareholders today would now have holdings in National Grid, Royal Dutch Shell and Centrica, which is now the parent group of British Gas.
Shareholders also received a payout with the Shell takeover in 2016. This – with share price growth over the years – amounts to a total return of 1,520 per cent since 1986, or £16,200, according to calculations by investment platform AJ Bell.
By contrast, a £1,000 investment in the FTSE 100 index of the UK’s 100 biggest firms would have risen in value by 367 per cent over the same period and grown to £4,670.
British Airways shareholders would have made far less. An investor who bought £1,000 of BA shares on listing in 1987 is now sitting on £1,248. BA merged with Spanish airline Iberia in 2011 to form International Airlines Group and shares were transferred to this new firm.
Shares in IAG are down 66 per cent over the past five years, as Covid travel restrictions and rising fuel costs hit airline profits.
Someone who invested in £1,000 of British Telecom shares in 1984 would have fared even worse. They would have had a combination of BT and O2 shares worth just £1,150 today (O2 was spun out of BT in 2002). Even those who did take part in its rights issue in 2001 – when shareholders were able to increase their holding at a discounted price – would have only £1,450 today.
Original investors who sold when privatised companies were at their peak made exceptional returns. BT shares listed at £1.30 and are now trading at £1.54. But they reached more than £7 just before the O2 spin-off. Selling them then would have netted a 438 per cent return.
What’s the word: The Tell Sid campaign promoted the sale of British Gas
An investment in South West Water in 1989 has been lucrative. A £1,000 investment at privatisation would now be £3,250. But shares are down 31 per cent over the past five years, so investors who got out in 2018 made more than those who hung on. The parent group changed its name to Pennon in 1998.
Although the fortunes of privatised companies have been mixed, the real value of holding shares over the decades has been payouts in the form of dividends. Shareholders who reinvested dividends would in most cases have twice as many shares as they started with.
Taking the example of the person who invested £1,000 in British Gas on flotation – they would now have £40,600, of which £24,400 is due to dividends being reinvested.
Some sectors have delivered huge incomes. Water has returned more than £65 billion in dividends, though much will have gone to private firms since several utility suppliers have been taken private again.
Many remain cash generative. Shares in National Grid, for example, yield 4 per cent in dividend income, and Centrica 3 per cent.
So is it time to sell or time to buy?
British Airways owner IAG has had a difficult few years, but analysts predict its shares will bounce back. Broker Gerald Khoo from Liberum bank believes its share price could even double in the coming months as people prioritise holidays after the pandemic.
On the other hand, BAE Systems, which started as British Aerospace on listing in 1981, has seen its shares near an all-time high recently. A £1,000 investment in 1981 would now be worth £25,253 as the defence firm benefits from higher spending due to global tension. But investors question whether shares can rise much further.
John Moore, at wealth manager RBC Brewin Dolphin, is optimistic about National Grid and Pennon. Utilities tend to do well if living costs are squeezed as we always need electricity and water. They are also good dividend payers.
‘National Grid occupies a unique place as it owns the infrastructure we all rely on, while Pennon basically has a monopoly over its domestic water market with scope for growth in the non-domestic sector,’ says Moore. He adds that National Grid has been slow to allow renewable resources to connect to the grid, but has a huge opportunity to benefit from the move.
National Grid pays a 5 per cent dividend yield – or £5 for every £100 invested – which is attractive to those searching for income.
Pennon shares suffered last week after an investigation into its leakage data and water usage figures that could lead to a penalty. But its stable revenue stream means it is still an attractive option in today’s volatile market. As a result, the current dip in its share price – down over 6 per cent last week – may represent a buying opportunity.
What about Thatcher’s shareholder dream?
Share ownership has fallen over the decades – today just 12 per cent of UK adults hold individual shares. This is far from Thatcher’s dream of a society ‘where owning shares is as common as having a car’. Though car ownership is falling, 77 per cent of households have one.
Most UK adults hold shares today as part of their pensions. Pensions tend to invest in funds that hold a mix of shares and bonds. However, just a small proportion of these tend to be in UK companies, with far greater holdings in US and European firms.
Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.