Banks advising on Royal Mail sale should have payments frozen, union urges

The postal workers’ union has called on the government to stop any payments to banks who advised on the Royal Mail flotation, saying that the sale has cost taxpayers hundreds of millions of pounds.

The sale is set to be in the spotlight again as MPs question representatives from the banks who provided valuations ahead of the flotation.

The Communication Workers’ Union (CWU) said any further payments should be withheld on the basis that the banks undervalued the company.

CWU general secretary Billy Hayes said: “Hundreds of millions of pounds of taxpayers’ money have been lost because of the failure of the government and its advisers to accurately value the company. In other situations this would be gross incompetence or even theft. Private shareholders have lined their pockets at the expense of the taxpayer following the huge leap in the share price.

“At the very least the institutions which advised the government should not receive any further payments - which are discretionary. Serious consideration should be given to claiming back fees paid for shoddy advice which has left the client - the taxpayer - out of pocket.

“It’s time to see whose side the government is really on. Will they back their buddies in the city or stand up for the taxpayer and attempt to salvage some value for money from this debacle?”

Bosses from six banks will appear before the Business Select Committee in Parliament today as controversy over the sale continues.

Those due to appear are John Mayne, managing director, UK client coverage, JP Morgan; Ben Storey, head of UK investment banking & broking, Citibank; Gert Zonneveld, managing director, co-head of research, Panmure Gordon; James Agnew, chairman of UK corporate broking, Deutsche Bank; James Robertson, managing director, UBS and Richard Cormack, managing director, co-head of equity capital markets, Goldman Sachs.

The business secretary, Vince Cable, and business minister, Michael Fallon, will appear before the committee next week, as well as a representative from Lazard, the institution that vetted the flotation price.

The initial share price was set at 330p, valuing Royal Mail at £3.3bn, but the shares jumped by more than a third on the first day of trading and broke through the 500p mark within a week.

The share price on Tuesday stood at more than 550p. The CWU said this meant the government had undervalued the company by more than £2bn.

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