Royal Mail begins mail contract for 205 Scottish public agencies

Royal Mail has started its new public service contract with 205 organisations in Scotland, extending a deal awarded back in 2009 for a further three to four years. As reported last month, the company won a new deal through public sector contracting agency Scottish Procurement, in an award that came alongside a contract for rival TNT Post UK.

Royal Mail said on Friday that its new contract went live this month, including mail services for organisations in central government, the public healthcare sector, for municipal authorities, police and fire services and also Scottish universities.

While TNT Post’s contract covered ad-hoc mailings and a new hybrid mail service, Royal Mail’s three-year deal with an option for a fourth year covers the provision of planned mail campaigns, including printing and sorting of bulk mail as well as delivery.

Royal Mail said the nature of its contract meant it could manage every aspect of the service, from the provision of stationery and printing, to the sorting and delivery of mail to its final destination.

The firm said it would be providing a bespoke solution for the contract, specifically designed to meet the needs of Scottish Procurement and the public sector bodies being served.

Graham Davis, director of sales at Royal Mail, said: “We are very pleased to have won this contract. Royal Mail put in a very strong commercial bid that was able to compete both on money and quality.

“Postal service is our business, it is what we do and have done for centuries and we are happy to use our expertise to provide the best value to the Scottish taxpayer.”

Privatisation

State-owned Royal Mail is set to be privatised by the British government under current plans, with the Financial Times reporting yesterday that the sale could be in the form of an IPO, floating the company on the stock exchange to open up ownership.

The report, citing unnamed sources, suggested the IPO could take place in autumn 2013, although neither Royal Mail nor the UK government commented to confirm or deny the claims.

Last week’s Budget statement for 2012 saw a major hurdle cleared on the way to privatising Royal Mail, with the government declaring its intention to take over the legacy pension liabilities of the Group.

A new public-owned pension scheme is being set up, with around GBP 37.5bn ($60bn USD) of liabilities transferred over from the Royal Mail Pension Plan. During the process, about GBP 28bn of assets from the Royal Mail Pension Plan will transfer to government ownership.

The legacy pension liabilities, from the period before the UK postal market was opened to competition, were seen as a obligation hanging over Royal Mail that represented a particular financial disadvantage to rivals that have started operations since liberalisation in 2006.

The transfer of the Royal Mail pension liabilities was approved under EU State Aid rules by the EU Commission last week.