Rail link and bookie set to be privatised

THE High Speed 1 rail link, air traffic control, the student loan book and Tote, the national bookmaker, are among assets to be sold off by the coalition government.

Chancellor George Osborne yesterday said it was high time to return the businesses to private ownership, a move that will generate billions of pounds to begin repairing Britain’s battered public finances.

High Speed 1, the 68-mile route from London to the Channel Tunnel in Folkestone, is expected to fetch £1.5bn at auction for a 30-year lease. Although the price tag is a fraction of the £5bn spent building the link, transport secretary Philip Hammond said: “The money generated by this sale will make an early significant contribution to the crucial task of reducing the public sector debt.”

The route will be watched over by the Office of Rail Regulation to safeguard passengers’ interests.

Offloading the government’s stake in NATS, the air traffic controller, will be more complicated. The state owns 49 per cent of the company, with the remainder owned by employees and a consortium of seven airlines. Last month, consortium boss Peter Read said he expected the government to retain a share of around 25 per cent in the case of privatisation. He said the airlines may also look to sell down their holdings, suggesting a stockmarket flotation rather than a trade sale could be on the cards.

Last year, NATS turned a pre-tax profit of £95m on revenues of £767m. The asset could be worth around £1.5bn based on valuation multiples for other aerospace companies.

The student loan book was worth an estimated £18bn last year, while Tote – officially the Horserace Totalisator Board – was valued at around £300m in 2008, when then-Prime Minister Gordon Brown considered divesting the bookmaker.

Given market volatility around Eurozone sovereign debt problems, experts said the government’s timing was not ideal. Neil Vickers, partner at Denton Wilde Sapte, questioned whether the Treasury would get a decent price through the sell-offs.

He said: “The M&A market’s in a downturn as well as the rest of the economy, so that does usually affect prices, unless one of those assets is of particular interest to a buying party.”