UK Royal Mail pushes on with staff shares
Royal Mail says it is still “pushing hard” for government approval to give 20 per cent of its shares to staff, as part of its application for Pounds 2bn of state money.
The news comes in spite of an agreement with unions to make basic pay a priority over other benefits.
Allan Leighton, the state-owned postal operator’s chairman, yesterday wrote to its 165,000 staff to update them on the “noise around privatisation etc and shares for you all”. The proposed employee share ownership scheme “can be done very simply and we are pushing hard on this”, he wrote.
Royal Mail was adamant its championing of the scheme was not undermined by a productivity agreement reached this week with the Communication Workers’ Union, which has opposed the proposal. The agreement – which allocates 40 per cent of cost savings to the next pay round – says Royal Mail recognises staff have clearly prioritised increases in basic pay over other benefits.
The share scheme proposal also faces a political stumbling block. Almost 200 Labour MPs have signed a motion opposing any dilution of the government’s 100 per cent shareholding in the postal group.
Ministers are under in-creasing pressure to reach a decision on both the scheme and the linked request for Pounds 2bn of investment.
Royal Mail is delaying its response to price controls proposed by the regulator until it gets the government verdict. If the Pounds 2bn request is rejected, Royal Mail will appeal to the Competition Commission over the price controls. This decision has to be made before April 3, when the new controls – including a 2p rise in the price of a first-class stamp – are due to take effect.
Royal Mail has now proposed that only Pounds 1.25bn of this new funding is raised through a rights issue, under which the government would, in effect, grant more shares to itself, according to senior insiders close to the negotiations. The remainder of the Pounds 2bn would come from Pounds 800m of gilts held in one of the postal group’s accounts, which cannot be used without government agreement. These funds date back to the 1980s and 1990s, when Royal Mail had to pay some of its profits into a reserves fund controlled by its sole shareholder, the government.
Royal Mail hopes the chancellor’s concerns about the potential impact of its in-vestment request on public finances will be eased by January’s agreement to sell Westinghouse, the state-owned nuclear power plant company, to Toshiba.
