Post chief in GBP 1.2bn threat

Royal Mail is threatening to freeze GBP 1.2bn in crucial investments if its employees vote next month for a national strike.

Faced by a rapidly shrinking market and growing competition, the postal service is determined to end antiquated working practices.

But an all-out strike, the first for ten years, would have a devastating effect by further boosting competition from private companies that are soon expected to handle one in five letters and parcels.

The confrontation comes as Trade and Industry Secretary Alistair Darling confirms plans to close 2,500 small post offices.

The postal workers’ union has already rejected a pay offer of 2.5% or a GBP 600 lump sum payment for the year and is instead demanding a 27% rise and a shorter working week. Royal Mail chief executive Adam Crozier says he will not go ahead with the company’s five-year investment plan agreed in February unless 130,000 workers agree to management’s ‘final’ offer, which is conditional on changes in working practices.

This means that giant sophisticated sorting machines, which offer the key to major productivity gains, will not be put into main sorting offices.

Even if the unions agree to the package, about 40,000 jobs are expected to go during the upgrades. Royal Mail warns more jobs could be lost after a prolonged dispute.

The company is prepared to announce a sharp drop in its annual operating profits for the year ending March 31 compared with profits of GBP 355m the year before. In the past half-year, profits slumped 86% to GBP 22m.

The Communications Workers Union will start balloting members this week and the result is expected to be announced on June 7.

Royal Mail believes winning this battle is vital to its survival. It sees changes in working conditions as essential, particularly ending early-morning shifts, traditionally starting before 6am, when workers are given an allowance but there is no mail to sort.

The company also wants to reduce weekend working and introduce more flexibility on summer holidays.