Consignia has nothing to fear

Birmingham-based Business Post, one of the four companies with licenses to compete with the Post Office, has rubbished talk that the competition would lead to the collapse of the national mail service.

The mail regulator has proposed that private sector companies like Business Post be allowed to compete with the Post Office, now called Consignia, for the delivery of bulk business letters from April.

But Consignia has said the proposals open up its most lucrative business too quickly to competition and may mean it does not have enough money to maintain the single priced national mail service.

The implication is that people living in the countryside, where it is more expensive to collect and deliver letters, could soon face having to pay more for a first and second class stamp than city dwellers.

However, Business Post's chief executive Paul Carvell said yesterday talk of the Post Office's imminent collapse was overdone.

'I bet you the Royal Mail will still have 95 per cent of that market in two to three years time,' he said.

'It's all a bit of rhetoric really.'

The Royal Mail delivers 80 million items a day and 85 per cent of those items are tagged business mail.

This market is growing at ten per cent a year and Mr Carvell argued there was plenty of room for competitors.

'We have got quite a thriving market with growth in the base business.' he said.

'A few players like us coming in and taking a few percentage points will not do the damage they are saying.

'I'd be the happiest chief executive in Birmingham if I had around three to four per cent market share in the next four years.'

PostComm, the regulator, surprised the industry two weeks ago by suggesting the private sector should be licensed for seven year stints, rather than for a tentative one year trial, as it had originally proposed.

The proposals are still being studied by the companies and the Department of Trade and Industry, with a final deadline for comment set for March 15.

Mr Carvell said Business Post 'had to take a step back and take a breath' once it had seen the new proposals as it raised the bar in terms of opportunities.

Under the original proposal, Business Post had envisaged pitching from April for specific deliveries in major cities like Birmingham where it could make money.

However, the seven year licence allows it to plan the investment needed in IT and its fleet to attack a far larger proportion of the Post Office's market. But this extra planning has meant that Birmingham businesses will have to wait a little while longer for the service.

'We are still doing our revised blueprint, but late spring – May, June – would be realistic,' said Mr Carvell.

Business Post will compete with the Post Office to collect, sort and deliver mail from large businesses like banks and insurance companies that send out more than 4,000 items a day.

But Business Post will have to pay the Post Office to use its postmen and negotiations between the two sides over the cost of access are ongoing.

'I want to pay for the services I get. I don't want to pay for the services I don't,' said Mr Carvell.

'We'd feel a little bit miffed if they are going to charge for head office costs in London.'

Mr Carvell said they were 'talking the same numbers' as the Post Office over the physical delivery costs.

But he added: 'Where we have some work to do is over the level of profit and contribution to overhead costs.'

Consignia said yesterday that it needed to cut cost base by 15 per cent, or pounds 1.5 billion, by March next year or it faces financial collapse.

Chairman Alan Leighton said the business was 'haemorrhaging' cash, losing up to pounds 1.5 million a day.

'Clearly it can't go on as it is. The view at the moment is the right one, which is everything is up for review, and no change clearly in the post office is not now an option,' Mr Leighton said.

'I think we have been too much inwardly focused, there has been too much infighting, and we have to get on and look at really focusing on our customers and competition.

'And therefore we are going to come up with some radical solutions.'

These could include selling some of the businesses Consignia has acquired in Europe and even closing down its heavily loss-making bulk mail deliver operation ParcelForce.

Mr Carvell at Business Post said he would be interested in taking on some of the Post Office's postmen, but would not look at other areas like Parcel Force.

'I wouldn't touch that with a barge poll, ' he said.

'That should be put to sleep nicely and they should get their concentration back to letters.'

Consignia is also facing strike action over pay and endured a series of disputes last year that disrupted mail collection and delivery.

Amicus, a union representing some 600 senior management types at Consignia, yesterday released a survey that found the company's managers believed Consignia was heading for trouble under deregulation.

Union general secretary Roger Lyons said: 'The 600 senior managers we represent in Consignia believe that the postal service as we know it faces meltdown if the current plan of the regulator is implemented too fast.

'The reality is that if the regulator goes ahead and privatises the juicy cherry picked morsels from April, then a universal postal service as we know it will be ended.'

Birmingham Post