Strike worth GBP 10m to Royal Mail rival

One of the private delivery firms competing with the Royal Mail predicted tonight that it already stood to make at least GBP 10m out of the postal service's 24-hour strike which gets under way in the morning.

James Greenbury, the chief executive of DX, which is backed by private equity group Candover Partners, said the delivery group had attracted an "extraordinary" level of demand from new customers – more in the past week than for the whole of last year.

The comments highlighted the threat to the state-owned postal service from the low-cost and aggressive private delivery firms. Groups such as DX, Global Mail and Dutch-based TNT are coming into the market at a time when overall mail volumes are falling because of email and other electronic media.

DX was formed after a Royal Mail strike in the 1970s and its managers believe any protracted dispute between the state-owned postal service and the Communication Workers Union will be another boost for private firms. Competitors are already making inroads into the business post market as a result of full deregulation.

The strike, the first national postal stoppage for 11 years, comes after a breakdown in talks over pay and modernisation.

The dispute threatens to hit postal services, Crown post offices and Royal Mail's cash handling operation, but 14,000 post offices will remain open. The union executive has threatened further disruption within two weeks. Its members voted by a 75% majority to turn down a 2.5% wage increase and oppose shakeup plans which they fear could cost around 40,000 jobs within five years.

The Royal Mail's chief executive, Adam Crozier, has argued that the strike can only add to the competitive difficulties the company is facing. He said a GBP 1.2bn investment programme to modernise its systems can only be put in place if staff take a responsible attitude towards a different pay and productivity arrangement.

The British Chambers of Commerce said tonight that its members were already moving away from the Royal Mail. David Frost, BCC director general, said: "Unfortunately, Royal Mail is being left behind by more nimble competitors and strike action is only going to make matters worse."

Since private operators were given access to the UK postal market, Royal Mail says it has lost 40% of its business customers, including the Department for Work and Pensions, BT and last week online retailer Amazon.

One of the biggest gainers has been Dutch-based TNT, which claims to be distributing more than 1bn items of mail a year in Britain and made profits worldwide of GBP 240m last year. The company has been conducting trials of door-to-door deliveries in Glasgow and Manchester before it starts a full service in all major British cities. TNT, Global Mail, which is backed by Deutsche Post, and others have licences to collect and sort mail but must hand it over to Royal Mail for the "final mile" delivery to the door.

DX offers next day home delivery for GBP 3.50 and is a direct competitor to Royal Mail's own special delivery, which costs GBP 4.30. DX has built up an annual turnover of GBP 160m and had set a target to make an extra GBP 10m this year. It says it will easily achieve this because of the strike.

Mr Greenbury, a part-owner of the business with its private equity backers, has criticized Royal Mail for its heavy cost-structure. He pointed out that as chief executive of DX he earned "less than a quarter of Adam Crozier's substantial pay packet".

Royal Mail took out newspaper adverts on Wednesday expressing its "disappointment" with the union's decision to strike and apologising for inconvenience to customers.

Only around 20,000 of the 150,000 Royal Mail staff are not members of the union. Postcomm, the industry regulator, declined to comment on the conflict.