UK government eyes £16bn asset sale bonanza

Prime minister Gordon Brown has unveiled proposals to sell ‘non-financial’ assets including transport infrastructure, student loans, a uranium processing business and a state-owned bookmaker.

British prime minister Gordon Brown has unveiled plans to raise £16 billion (€17 billion; $25 billion) through the sale of government-owned infrastructure, real estate and other “non-financial” assets in an effort to stem the country’s rising budget deficit.

The sales are likely to draw private equity interest, depending on terms and pricing. Earlier this year, CVC Capital Partners was reportedly in talks with the government over a £2 billion privatisation of the Royal Mail postal service, but the government later pulled the deal due to adverse market conditions.

Brown told a group of economists gathered in London that the government would put a number of assets up for sale over the next two years, including the Dartford Crossing toll bridge and the Channel Tunnel rail link between England and France.

Gordon Brown

The government is looking to raise £3 billion through the first part of the asset sale strategy, which will comprise the Dartford Crossing, the Channel Tunnel rail link, bookmaker the Tote, the Student Loan Company and a stake in Urenco. Brown said the sale of the 33 percent interest in Urenco, which manufactures enriched uranium for the nuclear power industry and is co-owned by the Dutch government and German utilities RWE and E.ON, was still “subject to security issues being addressed”.

The second part of the sale will comprise local government-owned real estate assets. Brown is hoping to sell up to £13 billion of what is a £220 billion portfolio, but said that this real estate aspect of the asset sale would only take place when the market for property assets picks up.

The UK government had previously tried selling the Tote bookmaking business, later abandoning the process after failing to reach its £400 million asking price. The value of the UK student loan book currently stands at around £18 billion.

The move to instigate the asset sales comes as the UK faces a spiralling public debt as a result of the recession. Earlier this year chancellor of the exchequer Alistair Darling revealed public borrowing could exceed £175 billion next year, an all-time high.

The asset sales have been dubbed by some opposition members of parliament as the biggest sell-off since the 1980s privatisations, referring to the privatisation of British Telecom and several utilities under Margaret Thatcher’s Conservative government.

Previous asset sales by the government have been met with criticism, notably the 2003 sale of a stake in defence company Qinetiq to The Carlyle Group. The UK's National Audit Office conducted an inquiry following public outrage that surrounded the 112 percent IRR Carlyle made when it took Qinetiq public in 2006, and found the competitive process, which also included Permira, Candover and Goldman Sachs, could have secured “more for the taxpayer”.

News of the proposed sales has led to investors selling sterling in large numbers, causing the pound to fall to five month lows against the dollar and euro.

Brown’s announcement comes as his Labour government continues to lag significantly behind the opposition Conservative party in opinion polls. A general election is to take place next year.