ON October 11th the British government will sell around 60% of its stake in the Royal Mail, the state-owned postal service, via a flotation on the London Stock Exchange. Unlike other former state-owned businesses such as telecoms firms, energy providers and the railways, Royal Mail has so far avoided privatisation. Previous attempts failed due to backbench revolts by wayward MPs. Even Margaret Thatcher, who as prime minister started Britain’s sell-off of public assets, was “not prepared to have the Queen’s head privatised”, a reference to the iconic stamps which bear a motif of the bejewelled monarch. So why is the Royal Mail being privatised now? The British government claims privatisation will give the company access to private capital and improve its competitiveness. The need for more investment is urgent. Changing demand for postal services have transformed its business model. Parcel volumes are increasing because of the boom in internet shopping, but the numbers of letters sent daily fell from 82m in 2004 to just 58m in 2013. The government says it cannot afford to invest itself to help Royal Mail cope with this shift. It has already ploughed £3 billion ($4.7 billion) into modernising the Post Office’s network of 11,500 branches, which are not included in the sale. Last month George Osborne, the chancellor, said that public-sector spending cuts may last until 2020. Tapping the stockmarket is seen as the only way of ensuring sufficient investment over the next few years. The government notes that the injection of private capital into postal services seems to have worked elsewhere. Belgium’s postal service returned to profitability soon after its part-privatisation in 2006 and it now enjoys profit margins of 17%. Similar increases in productivity and profitability can be seen at Austria Post and at Deutsche Post. Both companies have profit margins double that of Royal Mail.

Privatisation also offers the government other benefits. A privately owned Royal Mail would mean that future disputes with the Communications Workers Union over postmen’s pay and conditions might cause less political damage to ministers. The sale will also help Mr Osborne meet his deficit-reduction targets; this week’s sale will produce up to £2 billion for the Treasury. A privatised Royal Mail would be less likely to be a liability in the future, as it would be harder to justify a public bail-out if it got into financial difficulties. Political motivations may play a role too. The coalition government privately hopes that a large sale of discounted shares to the public will bring back positive memories of the popular sell-offs of the 1980s, boosting its flagging poll ratings.

But it is doubtful whether floating Royal Mail as a public company, rather than selling it to a single buyer, is the best way to achieve some of these aims. New research suggests that private companies invest more in the long term than publicly listed ones, which tend to focus on short-run profitability. Private companies are more able to absorb the financial costs associated with breaking intransigent unions and making big long-term investments, problems Royal Mail will face in the coming years. A private buyer might also make more money for the government than a flotation. Analysts at Canaccord Genuity, a bank, have suggested that Royal Mail is worth as much as 80% more than the value the government is floating it at. As Harold Macmillan, a former prime minister, once suggested, the British government may well find it is selling off the family silver too cheaply and to poor effect.