Tell Sid his £1,000 has grown into £16,200

Forty years ago, Margaret Thatcher was re-elected with a manifesto to sell Britain’s state monopolies to the public. She dreamed of transforming ordinary citizens into an army of private shareholders, who owned and shared the wealth of Britain’s largest corporations. Thatcher promised that no industry would remain in state ownership unless there was an overwhelming reason to do so.

In the following years, she fulfilled this promise by selling BT, British Gas, British Airways and Rolls-Royce, among others. Millions bought stocks for the first time – and hundreds of thousands still have them.

But how much would you have earned if you had invested when these companies were listed and if you still own the shares?

Wealth & Personal Finance examines which companies would have brought you the most profit – and which are still worth buying or holding today.

How did Margaret Thatcher’s vision go?

Thatcher’s wave of privatization changed the face of investment in the UK – and the impact is still being felt.

“Before the high-profile privatizations of the 1980s, relatively few people owned shares,” says Lee Wild of investment platform Interactive Investor. “The sale of BT became the biggest catalyst for public ownership and remains hugely important to this day.”

Privatization had already started with the sell-out of BP and British Aerospace, but it really took off after Thatcher’s re-election on 9 June 1983. 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 privatization.

The sell-off of BT was followed two years later in December 1986 by the flotation of British Gas, with an iconic advertising campaign called Tell Sid enticing 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 opportunity to buy stock.

By the late 1980s, more than 20 per cent of UK adults held shares, up from 7 per cent a decade earlier.

Enthusiasts also bought shares in British ports, airports, steelmakers, engineers and water suppliers as Associated British Ports, BAA, British Steel, Rolls-Royce and all UK water companies went public.

Over the years, several of these companies, such as Amersham International (formerly the Radiochemical Centre) and British Steel, have been delisted or split into new companies. But some can still be invested in today.

The best and the worst performers

Investors in British Gas are the big winners. An investor who bought £1,000 worth of shares in British Gas when it went public in 1986 would now own shares worth £16,200.

British Gas has been spun off and bought over the years, so shareholders would now have interests in National Grid, Royal Dutch Shell and Centrica, which is now the parent group of British Gas.

Shareholders also received a distribution on the Shell acquisition in 2016. With the share price growing over the years, this equates 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 largest companies would have increased in value by 367 per cent to £4,670 over the same period.

British Airways shareholders would have earned much less. An investor who bought £1,000 worth of BA shares at the 1987 listing is now sitting at £1,248. BA merged with Spanish airline Iberia in 2011 to form International Airlines Group and shares were transferred to this new company.

Shares in IAG are down 66 percent over the past five years as Covid travel restrictions and rising fuel costs squeeze airline profits.

Someone who had invested in £1,000 worth 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 spun out of BT in 2002). Even those who took part in the 2001 rights issue – when shareholders could increase their stake at a discounted price – would have only £1,450 today.

Native investors who sold when privatized companies were at their peak reaped exceptional returns. BT shares are listed at £1.30 and are now trading at £1.54. But they reached over £7 right before the O2 spin-off. If you then sold them, it would have yielded a return of 438 percent.

An investment in South West Water in 1989 was lucrative. An investment of £1,000 on privatization would now be £3,250. But the shares are down 31 percent over the past five years, so investors who got out in 2018 earned more than those who stuck with it. The parent group changed its name to Pennon in 1998.

While the fortunes of privatized companies are mixed, the real value of stock ownership in recent decades has come from distributions 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 at the IPO, they would now have £40,600, of which £24,400 is due to reinvested dividends.

Some sectors have generated huge incomes. Water has returned more than £65bn in dividends, although much will have gone to private companies since several utility suppliers went private again.

Many remain cash-generating. For example, shares in National Grid yield 4 percent dividend income and Centrica 3 percent.

So is it time to sell or time to buy?

IAG, which owns British Airways, has had a rough few years, but analysts predict its shares will recover. Liberum bank broker Gerald Khoo thinks the share price could even double in the coming months as people prioritize holidays after the pandemic.

On the other hand, BAE Systems, which started as British Aerospace on the stock market in 1981, has recently seen its shares close to an all-time high. An investment of £1,000 in 1981 would now be worth £25,253 as the defense company benefits from higher spending due to global tensions. But investors are wondering if stocks can rise much further.

John Moore, at asset manager RBC Brewin Dolphin, is optimistic about National Grid and Pennon. Utilities usually do well when the cost of living is under pressure, as we always need electricity and water. They are also good dividend payers.

“National Grid is unique in that it owns the infrastructure we all rely on, while Pennon effectively monopolizes its domestic water market with room for growth in the non-domestic sector,” says Moore. He adds that National Grid has been slow to connect renewables to the grid, but has a huge opportunity to capitalize on the move.

National Grid pays a dividend yield of 5 per cent – ​​or £5 for every £100 invested – which appeals to those looking for income.

Pennon stock suffered last week after an investigation into its leak records and water usage figures that could lead to a fine. But thanks to the stable income stream, it is still an attractive option in today’s volatile market. As a result, the current dip in the stock price — down more than 6 percent last week — could be a buying opportunity.

What about Thatcher’s shareholder dream?

Shareholdings have declined over the decades – today only 12 per cent of adults in the UK own individual shares. This is a far cry from Thatcher’s dream of a society ‘where owning shares is as common as owning a car’. Although car ownership is falling, 77 percent of households own one.

Most British adults today hold stocks as part of their retirement. Pensions usually invest in funds that contain a mix of stocks and bonds. However, only a small portion of this is in UK companies, with much larger holdings in US and European companies.