UK Royal Mail asks government for staff to be given stake in the firm

Royal Mail has formally asked the Department of Trade and Industry to allow staff to be given a stake in the company as part of its proposals seeking the government’s financial backing for a pounds 2bn modernisation programme.

Royal Mail’s chairman, Allan Leighton, has been pressing for some time for workers to be given up to 20% of the company to improve efficiency and competitiveness following full liberalisation of the postal market at the beginning of the year.

Yesterday a Royal Mail spokesman said: “The proposals include giving an equal stake in Royal Mail to all of its people to reinforce their commitment to tackling the challenges posed by competition and to reward them for future success.”

Alan Johnson, the trade and industry secretary, confirmed that the government would not privatise Royal Mail and agreed to consider giving staff a stake in the business. “We will continue to pursue our ambition of a publicly owned Royal Mail fully restored to good health and providing customers with an excellent service and its employees with rewarding employment.

“We are not ruling out options to increase workers’ involvement, including an employee stake.” Mr Johnson said it would be “worth examining” the idea of staff holding shares in trust, which could not be transferred to non-employees.

The Communication Workers Union is firmly against the idea. “We are completely opposed to this. We see it as creeping privatisation,” a spokeswoman said.

Neither the Royal Mail nor the government is putting a value on Royal Mail or how to award shares. Estimates have suggested that it could be worth about pounds 4bn, which would imply the 165,000 staff getting shares worth about pounds 5,000 each.

Valuing the business will be complex. As well as pounds 2bn that Royal Mail wants to modernise its sorting operations, there is a pension fund deficit of pounds 4bn. The impact of market liberalisation on Royal Mail will not be clear for some time but will inevitably affect its value. It has already emerged that private companies are increasingly using access arrangements to use Royal Mail’s network to deliver post.

Though the recent price-control regime announced by the industry regulator, Postcomm, should provide Royal Mail with extra resources, it still needs backing from the government, its only shareholder. Any such investment will have to be on commercial terms to avoid being challenged as state aid.

Yesterday Royal Mail said it was accepting Postcomm’s price controls, which will see the cost of a first-class stamp rise by 2p to 32p on Monday while second-class post will rise by 2p to 23p.