Royal Mail's deficit cloud darkens
Opposition parties have rounded on the government over Royal Mail’s deepening financial crisis, as an exodus of big corporate clients heaped pressure on the firm to tackle its GBP5.6bn pensions deficit.
BT dropped Royal Mail in favour of TNT Post for a GBP90m contract, with UK energy supplier Centrica and the Carphone Warehouse quickly following suit – both choosing private suppliers.
In total Royal Mail lost out on contracts worth nearly GBP150m.
The Department for Work and Pensions (DWP) became the first high profile department to turn its back on the Royal Mail and has since said it would not rule out dropping the firm for future contracts.
Alan Duncan, Conservative shadow trade, industry and energy secretary, quizzed the government in parliament over its failure to deal with the situation.
He said: “Is it not the case the government is opening up Royal Mail to greater competition and demanding it behave like a private business, while denying it the freedom it needs to compete effectively?”
Duncan added: “How does the minister expect it to do well when its competitors are free to compete with it, yet it is not free to compete with them.”
Jim Fitzpatrick, the parliamentary under-secretary of state for trade and industry, defended the government and said Royal Mail did have the freedom to compete.
“We have liberalised the markets to ensure it is a competitive service industry. It is not consistent for opposition members to say there should be freedom within the market, but then to tell us the restrictions on Royal Mail are making the business less profitable,” Fitzpatrick said.
The government-owned former monopoly has struggled to retain business after postal services were fully opened to competition last year. Since then it’s lost more than 10% of the mail-handling market to private firms.
Alistair Carmichael, Liberal Democrat MP for the Northern Isles, said he was seeking a parliamentary debate for answers to Royal Mail’s worsening pensions crisis.
“The further loss of contracts is as depressing as it is predictable. We now need to ask the government where the money is going to come from for Royal Mail and its pension scheme,” he said.
“I will ask the government what the prospects are for Royal Mail now they’ve lost all this business and the impact this hason reducing the pension scheme deficit.”
A DWP spokesman said: “I would be very surprised if other companies made important decisions based on what we did. We can’t rule out dropping them, just as we can’t rule out the sun won’t come up tomorrow.”
Royal Mail refused to comment on individual contract losses.
