Consignia to cut 1,600 Scots jobs

Consignia to cut 1,600 Scots jobs

The Scotsman – United Kingdom, Oct 4, 2001
BY ANDREW TURPIN DEPUTY CITY EDITOR

SCOTLAND could lose up to 1,600 jobs under a massive cost-cutting scheme announced yesterday by Consignia, owner of the Post Office, Royal Mail and Parcelforce.

Consignia intends to cut Pounds 1 billion off costs and cut its total UK workforce by 20,000.

Unions described the move as the most ruthless attack on costs in the Royal Mail’s 350 year history and said they would vigorously oppose them.

The planned cuts, representing around 15 per cent of the state-owned group’s annual Pounds 6.6 billion costs bill, will be delivered by March 2003.

The move was greeted with outrage by unions and seems likely to trigger further industrial unrest in the business.

Consignia denied union claims that up to 15 per cent of the group’s 200,000 workers, of whom 16,000 are in Scotland, could be made redundant.

But a spokesman admitted “something like” 10 per cent of staff could go in some areas, possibly meaning 20,000 job cuts nationally and 1,600 in Scotland.

He said front line, customer-facing services, such as door-to-door deliveries, were less likely to be affected than internal services, such as vehicle maintenance and other operations which may be outsourced.

The moves come as competition to Consignia’s operations increases. Last month, businesses services group Hays was licenced to start a rival service to the Royal Mail’s core letter delivery operations, removing its historic monopoly.

An internal briefing paper sent to Consignia managers said the group was facing a “financial crisis”.

Consignia, which has an Pounds 8 billion turnover, made a net loss last year of Pounds 264 million and a loss of Pounds 3 million before exceptional items.

Even though it made Pounds 103 million profits before tax and exceptional items, this was Pounds 88 million below targets agreed with the government.

The pre-tax profit was almost entirely due to the Pounds 106 million interest it received on reserves held in Consignia’s name on behalf of the government. These payments are due to end on a date yet to be decided.

The memo to managers warned the group was moving into loss and unless “drastic action” was taken the organisation would fail as a business.

It added: “That’s why the executive board has decided that we must take steps to cut our costs. The levels of inefficiency in the business, despite our best efforts to control them, are crippling us.”

The Communication Workers’ Union said it was “shocked” by the news. Its deputy general secretary, John Keggie, said: “This madcap plan to slice up the industry and reduce the workforce by 15 per cent is ill-conceived and destructive.”

Keggie said attempts to make workers compulsorily redundant or to outsource parts of the industry would be “vigorously opposed”.

Consignia said various areas of the business were being examined for cost-cutting opportunities.

They included Consignia’s central headquarters operations; the Royal Mail’s delivery operations; the parcels business; outsourcing of some internal business service units, and ceasing or delaying some major projects.

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