George Osborne: Now is not the right time for Lloyds share sale

Updated

Chancellor George Osborne has postponed the sale of the Government's final stake in Lloyds Banking Group, blaming turbulence in the global markets.

The Chancellor said he would wait until volatility in the markets had "calmed down", before pressing ahead with sale of the Government's near 10% stake in the high street lender.

The Government's last tranche of shares in Lloyds was slated to go on sale in the spring, but it is now thought it will be halted until after Easter.

The announcement comes amid continued chaos in the global markets, which have seen top-flight shares in London fall by some 7% since the start of the year and a sharp drop in commodity prices.

However, Mr Osborne insisted he would still sell the Lloyds shares, but would wait until the time was right.

He added: "I want to create a share-owning democracy. It's also my responsibility to ensure economic responsibility, so with these turbulent financial markets now is not the right time to have that sale."

The Government bought Lloyds shares for 74p when it used taxpayers' money to bail out the lender as it looked to bring stability to the banking industry at the height of the financial crisis.

David Cameron pledged during the general election to sell the final part of the Government's stake, which was expected to raise £2 billion.

Details of the sale - set be one of the biggest privatisations since British Gas and BT in the 1980s - were announced last October.

However, the Lloyds share price has fallen from 78p to 64p since then, meaning any efforts to press ahead with a sale would have seen shares sold at a substantial loss.

A Downing Street spokesman said it had taken into account the market conditions and it was important that any Lloyds share sale "delivered value for money".

The Government has already returned £16 billion to taxpayers by driving down its stake in the lender from 43% to just under 10%.

A spokesman for Lloyds said: "The timing of any future retail sale is a matter for the Government. Our focus is on moving the group forward so that it can continue to be profitable and deliver sustainable returns to all our shareholders."

The announcement also posed questions as to whether the Chancellor would now put on hold any plans to sell its remaining shares in Royal Bank of Scotland in which it has a 73% stake.

In his Autumn Statement, Mr Osborne said the Government planned to sell a further £25 billion of RBS shares, as it ramped up its efforts to dispose of taxpayer stakes in high street banks.

The Government also reiterated last year that it would sell £2 billion of RBS shares to retail investors in the spring, underpinned by a nationwide advertising campaign.

Laith Khalaf, analyst at Hargreaves Lansdown, said the Government's decision to postpone the sell-off of Lloyds shares was a "big disappointment" for investors, but selling shares at a loss was a "bridge too far".

He said the Chancellor was now "pinning his hopes on a recovery in the markets later in the year."

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