Charles Donald reflects on the first ten years of the Government’s in-house corporate finance boutique
For a former investment banker still relatively unfamiliar with the wider policy dynamics of Whitehall, it was a baptism of fire. Five days into my new job as CEO of UK Government Investments (UKGI), I found myself sitting in a meeting of the COBR Covid-19 Economic and Business Ministerial Implementation Group surrounded by the Chancellor of the Exchequer (in the chair), 12 other cabinet ministers and several senior government officials. It was mid-March 2020 and the start – as we all know now but did not know then – of a grim and painful two-year period for the country and the wider world. We were faced with a situation that required a delicate mixture of urgent action, calm heads and innovative thinking. Needless to say, as a new boy on the block, my contribution to that gathering was necessarily limited!
The onset of the pandemic, however, was a defining moment for UKGI. As a small and relatively recently-merged combination of the Shareholder Executive and UK Financial Investments (UKFI), set up as a wholly-owned subsidiary of HM Treasury in 2016, UKGI’s core mandate was (and still is) to act as the Government’s centre of expertise in corporate governance and corporate finance – essentially an in-house corporate advisory boutique staffed by a mix of civil servants, secondees and emigrés from the City of London. On top of that important but relatively unglamorous role, Covid suddenly and unexpectedly thrust us into the front line, initially to support the delivery of the Bank of England’s £85b Covid Corporate Financing Facility (CCFF) and to assemble a team of restructuring experts for Project Birch, the Government’s contingency plan to provide support as a last resort for critical companies. We remained integrally involved with delivery throughout the crisis, lending senior staff to the Vaccine Taskforce’s commercial negotiations, for example, as it embarked on the vital task of vaccine procurement.
Looking back over the last six years, UKGI’s objectives have evolved, expanded and matured, at least in part due to the opportunities to demonstrate our capabilities provided by the pandemic. Now seems a suitable time to examine our various roles, reflect on an organisation that brings together talent from the City and the Civil Service, and consider what lessons have been learnt as UKGI embarks on its second decade.
UKGI’s widening scope
UKGI brought under one roof two separate government-owned bodies, the Shareholder Executive (established in 2003 to perform the corporate governance responsibilities of the Government) and UK Financial Investments (formed in 2009 in the heat of the global financial crisis to oversee the management of publicly owned financial assets). An important part of our remit, which has grown in scale and sophistication, remains to act as the Government’s shareholder representative for some of the UK’s most complex, most commercial and most valuable arm’s length bodies. These now include AWE, Eutelsat Group, the National Wealth Fund, the National Energy System Operator, Reclaim Fund Limited, Sheffield Forgemasters and Sizewell C.
Our activities in other areas have also expanded. While demand for our advice on major government corporate finance matters, including government interventions, negotiations, mergers and acquisitions activity has remained pretty constant, we found ourselves privatising and nationalising during the period to an extent not expected at the outset. And following the introduction of the Financial Control Transactions Framework in 2024, UKGI now plays a central role in monitoring government loans, equity investments and contingent liabilities to enhance fiscal discipline and transparency. This broadening of scope reflects a growing recognition of UKGI as an incubator for private sector and civil service advisory capabilities, designed to ensure that private sector advice lands successfully across government.
The UKGI shareholder role
UKGI operates at the boundary between government and commercial reality. By 2025, its portfolio consisted of twenty-six organisations, on behalf of nine government departments, ranging from ministerial departments to limited companies in sectors as diverse as finance, defence, energy, transport and communications. Our work with each organisation will always depend on the Government’s shareholder relationship. At the arm’s-length end of the spectrum is Channel 4, where we do not sit on the board. At the other end are organisations like the British Business Bank and The Royal Mint, where government is the 100% owner. In these cases, we have a non-executive director (NED) role, much like a private equity owner might have across its portfolio. UKGI applies private sector governance disciplines and contributes portfolio knowledge and experience from working across government on multiple arms’ length bodies, its representatives combining financial and commercial expertise through their experience on public and private sector boards.
Over the past six years we have sought to build and refine that expertise, developing a new cadre of skilled and experienced NEDs and shareholder teams. What sets us apart is that individuals must be comfortable wearing the ‘two hats’ of a shareholder representative and board member with fiduciary responsibility to the company. Our centralised shareholder function allows shareholder NEDs to benefit from shared best practice and experience, commercial and legal support, a continuous improvement programme and peer support and review. To stretch a geographical analogy, an effective shareholder NED must be part of a close-knit archipelago rather than operating as a desert island.
In our shareholder representative role, we engaged very closely with the Post Office Horizon IT Inquiry and have embedded our preliminary lessons from that engagement into our Shareholder Representative NED Development Programme. I expect there will be further lessons when the inquiry produces its final report.
Asset realisation and major transactions
UKGI has a long-standing role advising government departments on any significant asset disposals or purchases. Two transactions dominated my time at UKGI – the first a ‘privatisation’ and the second a ‘nationalisation’. These were the sale of shares in NatWest Group (formerly Royal Bank of Scotland, RBS) and MOD’s purchase of Annington Homes.
When I joined UKGI in May 2018, HM Treasury still owned more than 62% of RBS. Our objective was to actively seek opportunities to return NatWest Group to private ownership whilst achieving value for money for the taxpayer. We designed the disposal structures and executed the sales, but it took us until May 2025 to sell the final tranche. Why did it take us so long?
The biggest challenge was assessing value for money for the taxpayer, complicated by the turbulence in markets from late 2018 until mid-2021, whether because of the struggle in Parliament to approve the mechanism to leave the EU, the severe stock market impact of the Covid pandemic or Russia’s invasion of Ukraine. It became increasingly apparent in early 2018 that RBS (as it then was) was going to start generating surplus capital which, potentially, could be applied to future share buybacks. We decided to put in place a mechanism for a Directed Buy Back, whereby RBS would purchase shares directly from HM Treasury via an overnight transaction but, crucially, at the market price. This would avoid HM Treasury providing any sort of discount to the purchaser – a typical feature of the Accelerated Book Build transactions that we completed in 2018 and 2021 – as well as maximising the sale proceeds. With HM Treasury needing to abstain from the shareholder vote to ensure that RBS’s minority shareholders approved, we approached the EGM in February 2019 with some apprehension. But much to our relief, 98.7% of the minority shareholders who voted were in favour of the proposal. We employed the Directed Buy Back mechanism five times between 2021 and 2024, selling a total of about 13.5% of the company back to the bank for total proceeds of around £5.8b.
The Trading Plan disposal mechanism, launched in August 2021 to sell small amounts of shares into the market, again, crucially, at the market price, also worked well, resulting in proceeds of £13.2b over the four years it was in place. Shares in this case could only be sold when the stock was trading above an agreed ‘floor price’.
The other transaction that dominated my time at UKGI was the reacquisition of the Service Family Accommodation estate from Annington Property Ltd, which was led by a small UKGI team, headed by UKGI’s CFO Rob Razzell, and completed in December 2024. The resulting transaction reversed a sale by the Government back in 1996 and ended an arrangement which had involved the taxpayer spending billions of pounds on rental payments for military housing whilst still remaining liable for rising maintenance costs. Under the agreement the MOD bought back 36,347 houses, valued at £10.1b when not subject to leases and purchased from Annington for £5.99b. The transaction also eliminated an annual rental bill of £230m.
UKGI’s involvement focused on the rent review negotiations and advice on the exercise of the MOD’s statutory leasehold enfranchisement rights via test cases and associated value for money assessments (upheld by the High Court).
International engagement and thought leadership
For many years a UKGI team has staffed the UK’s delegation to the Working Party on State Ownership and Privatisation Practices at the Organisation for Economic Co-operation and Development (OECD) in Paris, providing an opportunity to contribute to the development of international standards on state-owned enterprise (SOE) governance and privatisation. At the start of 2021, I was appointed Chair of the Working Party which required me, in March and October each year, to join more than 120 participants representing OECD member countries, the European Commission, non-member partner countries and OECD accession candidate countries in a multilateral dialogue. The Working Party is responsible for drawing up the OECD’s Guidelines on Corporate Governance of State-Owned Enterprises, first adopted in 2005 and then revised in 2015.
In 2023 the OECD decided that the guidelines should be revised again, in view of the recent evolution in corporate governance, to reflect the latest OECD standards and best practices. It fell to me to chair the 18-month revision process, which turned out to be a lesson in international diplomacy, arm- twisting and negotiation. Although the guidelines are aspirational and non-binding, there were 120 different views on how they should be drafted, not surprising perhaps given the range of different types of economies, from free market to statist. The 79-page document, which provides strong guidance for any custodian of government assets on what ‘good’ really looks like, is a testament to the pragmatism of the OECD’s membership.
Organisational challenges
UKGI is relatively small – a company of just over 150 employees located on the third floor of 100 Parliament Street. In my experience it is the pre-eminent place for private sector people to have an impact on the commercial day to day work of government, rubbing shoulders with civil servants and ministers on complex commercial and financial challenges.
It’s a modern, inclusive and open organisation with an emphasis on: learning and development (staff completed an average of 17.4 hours of professional development each year by 2024 and shareholder NEDs 55 hours each year); employee engagement (our employee engagement score of 73% in 2024/25 compared with a civil service average of 61%); values (the focus being on support, openness, professionalism, collaboration and expertise); and diversity and inclusion (women now comprise more than 45% of senior management and more than 10% of senior leaders identify as being from ethnically diverse backgrounds).
Conclusion
As I leave the CEO role, my overarching conclusions are firstly that the utility of UKGI is to focus on outcomes and getting things done. Secondly, that you cannot teach agility or the ability to be resilient in a crisis. However, by embedding best practice and transparency, you can prepare a team to meet the challenges that a crisis might bring. Thirdly, you cannot overinvest in people, or in building an organisational culture that emphasises collaboration and honesty combined with expertise and professionalism. You have to do this to align the motivations of a diverse group of investment bankers and public servants and then get them to build powerful partnerships together with government departments.
You need to do all this continuously to reinforce the benefits that a focus on culture can bring. Those three ingredients are a recipe for delivering tangible value for government departments and ultimately the taxpayer.
Charles Donald is the former CEO of UK Government Investments which he joined in 2018 after a career in investment banking.
