Royal Mail may have to pay GBP 1bn for the redundancies it needs, says consumer chief
The government may need to come up with an extra GBP 1bn to fund a massive redundancy programme to help the Royal Mail out of its crisis, a consumer chief warned before strike action by the Communication Workers Union.
David Bland, a regional chairman of Postwatch, believes the Royal Mail has no alternative to automating its letter systems and slimming down its workforce if it wants to survive private-sector competition. He said no one in the industry would win from industrial action at a time when many users were turning to email and other alternatives to the state postal service.
Without a clear look at the Royal Mail books it was impossible to know how much money was needed, added Mr Bland, but he believed it would be hundreds of millions of pounds if not a billion.
The department of trade and industry – now business, enterprise and regulatory reform (BERR) – has already agreed to allow Royal Mail to borrow GBP 1.2 bn to help it fund modernization of its systems. It has also allowed Royal Mail to put some GBP 800 m in a special account as part of a programme to bolster its pension scheme as it fights off companies such as TNT and UK Mail that are winning more and more of its business customers.
Mr. Bland believes that Royal Mail is giving an over-gloomy picture of its pension requirements, but the company accepts revenues are falling along with an overall 2 pct annual decline in post volumes and it is not in a position to fund a large wave of redundancies.
The Communication Workers Union has unleashed a wave of industrial action in a bid to halt plans that it believes could cost 40,000 people their jobs. The Royal Mail has not given figures for job losses but says it will invest the GBP 1.2bn only if the union cooperates more fully.
The industry regulator, Postcomm, said yesterday it was proposing to block a Royal Mail plan to introduce zonal pricing, with differential rates depending on where mail was to be delivered, for big business customers. Royal Mail said last night that it was “disappointed” by the decision and would be studying the details of the ruling.
