Royal Mail requests suspension of penalty payments

Royal Mail has asked the postal regulator to suspend rules that force it to compensate customers if it is unable to meet service targets because of industrial action by staff.

The request was submitted to Postcomm after the Communication Workers Union decided to ballot its members in a vote that is expected to support industrial action when the result is announced on Thursday.

Under the terms of its licence, Royal Mail must compensate business customers if it fails to meet its service targets for delivering bulk mail on time. Its prices for all users can also be pegged back in the following year if service falls below acceptable levels.

Royal Mail has told the regulator the risk of incurring hefty penalties could force it to shelve its modernisation plans to head off disruptive industrial action.

That would undermine its drive to become more efficient for the benefit of all postal users and its staff, whose job security would be threatened.

“Our business customers will not see innovation or long-term service improvement. Consumers will see the one-price-goes-anywhere service (provided and funded entirely by Royal Mail) threatened …

Avoidance of all industrial relations risk will not create the business and services that stakeholders want to see.

” The regulator previously imposed a fine of GBP 7.5m in December 2003 after Royal Mail failed to meet delivery targets for two types of business mail, saying the penalty was “relatively lenient” because it was a first offence.

Since then, the state-owned operator has improved its service performance and last week announced it had hit all but one of its 12 performance targets last year.

Industry observers expect Postcomm, which said it would be discussing the request this week, to be sympathetic to the request to strengthen Royal Mail’s hand in negotiating with the union. Postwatch, the users’ watchdog, said it was nervous about lifting the incentive for Royal Mail to take prompt action to deal with industrial action.

“When there’s official industrial action, it just doesn’t collect the mail,” said Andy Frewin.

“If it acts quickly, there will only be penalties for the mail already in the system.”

Royal Mail management is concerned that the union will adopt a guerrilla strategy of one-day strikes and working-to-rule that would hit its performance over the long term.

Industrial action would also hit Royal Mail’s private sector competitors which rely on it to deliver mail after they have collected and sorted it. “Any industrial action is a blow to the postal industry,” said Guy Buswell of Business Post, owner of UK Mail. “It makes customers think why they should use mail”.

Nick Wells of TNT Post, part of the Dutch postal giant which plans to create its own UK delivery network, said it did not yet have the operational capacity to replace Royal Mail.

“This sort of uncertainty doesn’t do much for the direct marketing businesses that are important users.”