UK Post office buyout plans grow
An attempt to launch a buyout of the loss-making post office network will move a step forward today when a postmasters’ group meets potential US investors in London to try to secure up to Pounds 150m of funding.
The buyout, which would have to be approved by the government and parliament, would break up the state-owned Royal Mail, which is understood to be strongly opposed to the proposal. Royal Mail declined to comment yesterday.
The initiative by Postmast- ernetwork, which says it represents 7,500 postmasters, has thrown a spotlight on the troubles of the post office network. Royal Mail and its sole shareholder, the government, face a conundrum over what to do with the network, which lost Pounds 110m in 2004-05.
The problem is exacerbated by the fact that the government subsidy of Pounds 150m a year for rural post offices is due to end in 2008. Even if the government wanted to renew this subsidy, European competition rules might prevent it. The payment was intended to ease the transition in the benefits system from payments being made direct to bank accounts rather than over post office counters.
The government would want to avoid politically damaging closures of local post offices. But Postcomm, Royal Mail’s regulator, last month argued that government support for rural post offices was “not sustainable” and “not a recipe for long-term survival”.
The postmasters’ group argues that a buyout would provide a viable alternative to Royal Mail running the network. It believes sub-post offices are being neglected in the Department of Trade and Industry’s review of Royal Mail’s future, intended to assess the effect of opening the postal market to full competition next year.
Gary Coyle, the head of Postmasternetwork, said: “The government’s carrying out this review of Royal Mail group, and Post Office Ltd is very much the poor cousin that keeps losing Pounds 110m a year. Ministers don’t really know what to do with it.” He argued that the constraints placed on rural post offices by the government – such as bars on charging the full market rate for some financial services – had made it almost impossible for many sub-postmasters to run their businesses at a profit. Unless they were allowed greater commercial freedom, “the post office model is dead”.
The buyout discussions with the potential US financiers were still at an “early stage”, Mr Coyle said, and the proposal had attracted “some interest from the City”.
As well as securing external funding, Mr Coyle said a buyout would need government support for “maybe three to five years”.
