Royal Mail must deliver modern service

As Royal Mail faces continuing industrial unrest in a dispute with postmen and women over pay and modernization, Huw Roberts, Director of Welsh Affairs, Royal Mail Group, gives an insight into the imperative for change in Britain’s postal services

The simple fact is that Royal Mail has to modernize. We are not immune from change – we are all sending fewer letters, the alternative electronic communication channels are growing and our competitors are taking a larger share of a smaller postbag. Strike action means our rivals, like Dutch-owned TNT and German Deutsche Post, will seize even more of the profitable business post market.

For the first time in years, we have been provided with an opportunity to invest in new technology and new equipment to transform our operations with a GBP 1.2bn loan, on commercial terms from the Government that will give us the means to compete successfully. This is taxpayers’ money and we urgently need to press on with using this loan wisely.

We can’t go on running a business based on sorting millions of items by hand every day, when newer companies are now using modern technology to do it faster and more cheaply. And none of our competitors has shown any interest in carrying ordinary post or delivering to the 1.56 million addresses in Wales or the 27 million letterboxes in the UK.

We are proud of the fact that more First Class letters arrive the next day than ever before. In the SA postcode area covering Swansea and West Wales, for example, we recently reported that 94.9 pct of First Class mail arrived the next day during 2006/2007– the best consistent quality of service results in years.

We are very sorry for the disruption to our customers’ mail services caused by the recent strike action and we are doing all we can to mitigate the impact with management volunteers collecting mail from Post Office branches and delivering as much Special Delivery and business mail as possible.

The reality is we are no longer a monopoly and rivals this year will be handling one letter in every five posted. They are winning an increasing share of the mail market – not because they work harder than our people – but because technology has made them more efficient.

The postal market is also declining – by 2.5 pct a year – in the face of competition from email and broadband development.

The simple fact is that rivals pay their people 25 pct less than Royal Mail and they are 40 pct more efficient than Royal Mail, because they have already modernized – so their costs and prices are lower.

The pay offer we have on the table for our postmen and women includes a 2.5 pct increase in basic pensionable pay, plus an GBP 800 cash dividend if performance targets are hit this year, plus a 50-50 share in any savings at local delivery offices. Although basic pay for postmen and women is GBP 323 a week, the average full-time postman and woman earns GBP 440 – above the national average, with the inclusion of pay supplements and overtime.

The Government loan is offering us a challenging, but achievable, way forward to enable our businesses to modernize. And, as many of our customers already acknowledge, Royal Mail has good quality, reliable products.

Our ability to offer a service to everyone, everywhere, six days a week, is dependent on success in winning contracts worth many millions of pounds from large mailers. The average household now spends just 50p a week on postage and unless Royal Mail succeeds in competing for business mail from large customers, we will not be able to generate the profits that are needed to fund the one-price-goes-anywhere universal service for stamped mail to the UK’s 27 million addresses.

Royal Mail, and its people, has the prospect of a great future. We are now, uniquely in our history, in a position to invest Government funding that will allow us to take on – and beat – the competition, to protect as many jobs as possible and to continue to give our people better pay and a final salary pension scheme, as well as ensuring that those who leave the business are able to do so on generous voluntary redundancy terms.

This is not a race to the bottom as the union claims – it is a race to invest and secure our business for the future.

This business has a fantastic heritage and plays a vital role in our society. But society is changing, which means we need to change too. This is the only way we can continue to play our vital role in the UK and to help the nation thrive and grow.