EU clears UK to provide GBP 634 Million subsidy to Royal Mail unit
The European Commission cleared the U.K. government to provide a GBP 634 million subsidy to a unit of state postal carrier Royal Mail.
The subsidy will be paid out over a three-year period to Post Office Ltd. which operates 14,000 post offices in the U.K. The funds will cover the costs of the postal carrier’s loss-making operations, ensuring universal service across the country.
The commission for the past 15 years has been trying to dismantle postal- service monopolies in the European Union. Some freight services have been opened to greater competition, but basic letter carriage remains a closed market in most countries.
Last month, E.U. countries voted to delay full postal-service liberalization to 2011. The commission, the bloc’s regulatory arm, had pushed for a 2009 deadline.
Under E.U. rules, state subsidies to businesses are legal only if they don’t distort competition. Since the Royal Mail is a legal monopoly, the commission reviewed its subsidy to ensure the money won’t unfairly subsidize services such as bill-payment and cash handling where Royal Mail competes with private-sector companies.
