Fears grow over postal shake-up
Controversial plans to end the UK’s mail monopoly are set to be watered down amid government concern that postal services will collapse if competition is introduced too soon.
Within the next 10 days, Consignia, the state-owned company formerly known as Royal Mail, will warn the regulator that its losses have climbed from £1m a day to £1.5m ($2.1m) after the worst January on record.
It will warn they could spiral out of control if the proposals to allow competition in bulk mail services from April are implemented.
This evidence of a worsening financial crisis at the group is expected to trigger a climbdown by Postcomm, the independent postal regulator, which is now showing increased willingness to respond to consultation. However, any change of heart will raise questions about the independence of Postcomm, which has come under behind-the-scenes pressure from ministers who are known to be unhappy with the speed of its proposals to introduce competition.
Postcomm is expected to justify the climbdown by arguing that the true state of Consignia’s finances was not made clear earlier.
“I don’t think we are going to stand absolutely rigid on every detail of our proposals if we are presented with good reasons for changing our minds,” said Graham Corbett, chairman of Postcomm.
Postcomm always planned to conduct a brief period of consultation before implementing its proposals, but regulators previously maintained this was largely a formality.
Nevertheless, Consignia’s lobbying against the proposals has intensified in recent weeks and appears to have won the support of powerful backers within government.
On Monday, Consignia’s chief executive agreed to waive a 10 per cent pay increase due to the company’s “perilous” financial position.
The rival postal operators planning to compete with Consignia’s bulk business mail market said they would be surprised if Postcomm’s suggestions were watered down.
Paul Carvell, chief executive of Business Post, which was last year given a one-year interim licence to deliver business mail, said: “If the timing was pushed back, it would be an irritant but it would not be the end of the world. We are in a marathon and not a sprint.”
Deutsche Post, Europe’s biggest postal services group, which is keen to enter the UK market, said it had not heard of rumours that the planned opening of the market may be pushed back. However, a spokesman said it was a “normal risk” that the process may be delayed.
The ending of postal monopolies is a live issue across Europe. The European Parliament is due to vote soon on an agreement requiring EU states to open up postal services to competition beginning next year.
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