UK Royal Mail tests water on rural cost-cutting plan

ROYAL Mail is lobbying politicians on its cost-cutting plans to head off the prospect of a mass closure of rural post offices.

Chief executive Adam Crozier has begun negotiations with government on the future of the £150m-a-year subsidy which keeps the rural network afloat.

He has warned that if the funding is stopped when the current package runs out in 2008 he will be forced to close 80% of the UK’s 8,000 rural post offices.

To slash the running costs, Crozier is proposing to replace some rural outlets with mobile post offices, while other small post offices will be merged.

The talks come amid a row at Whitehall over who should fund the rural subsidy, with the Department of Trade and Industry trying to pass the burden to the Department of Environment Food and Rural Affairs.

A spokeswoman for Royal Mail said: “We are engaged in discussions with government and the relevant politicians about rural post offices in Scotland and other areas of the UK to see if Post Office Ltd can provide services to customers in a different way. Once we have decided on the pilot areas, we will begin discussions with communities involved to see how it will affect them.”

Royal Mail has already begun a number of pilot projects aimed at cutting the overheads of the postal network. One post office in Fife has been moved into the local police station, another near Stirling is sharing office space with VisitScotland.

A trial of a mobile post office has been set up in Cumbria. Although run from the back of a van, the mobile service is still capable of offering all the banking facilities now offered by the Post Office by tapping into the phone network.

Other new models for the rural post office network would see sub-postmasters take control of a network of small post offices rather than just one branch, creating a hub-and-spoke network similar to those adopted.

The postal operator believes that the recent branch closures programme announced by Clydesdale Bank may drive up footfall in Scottish post offices and help keep some branches open.

Of the 1,700 post offices in Scotland, more than 1,100 are classified as rural. Losses at the network of 8,000 rural post offices are currently running at £3m a week. The current subsidy runs until 2008 – without the annual handout the Post Office would be insolvent.

Crozier revealed two weeks ago that talks have begun with the government on renewing the subsidy beyond 2008. Both Crozier and Trade and Industry Secretary Alan Johnson want to find ways to reduce it first.

A restructuring of the urban post office network has already led to 2,500 branches being closed. Royal Mail is also trying to transfer the running of some of its directly managed post offices to franchise holders.