Consignia fears 'ill thought-out' postal shake-up

POSTCOMM, the postal regulator, has failed to take account of the needs of Scottish mail users particularly business customers in the planned shake-up of the market, according to Consignia.

Lesley Sawers, the director of Scottish affairs of the Royal Mail and Post Office group, highlighted the fact that none of the seven-strong regulatory body comes from Scotland.

She argues that the geography, typography and business make-up of Scotland means that the planned shake-up of the postal service by the regulator is particularly ill-considered as regards the Scottish marketplace.

It is understood that business bodies including the Scottish Council Development and Industry are going to echo Consignia's concerns in submissions to the regulator as part of the consultation period which closes on Friday.

In January, the regulator proposed opening 30 per cent of Consignia's revenue to competition by proposing that the bulk business mail market – companies mailing 4,000 letters or more – should be opened up to competition.

But Sawers said that this section of the market actually made up 50 per cent of its revenue. About £2bn of its revenue could be "cherry picked" by other companies if the current shape of reforms goes ahead.

Indications from Postcomm last week suggested that they may be willing to reconsider this area of their proposals.

Sawers said that Consignia, a plc whose equity is 100 per cent owned by the government, is not afraid of the introduction of competition in its markets. But she said the company objected to the regulators "ill-thought out and hasty" proposals.

"We certainly expected change to come has gone much faster than anybody ever expected," Sawers said. "That calls into question the plans and proposals that Consignia has to turn the business around."

She said that 80 per cent of mail posted came from business customers.

She argued that the regulator had not thought through the effects, particularly on small business customers, of the changes in regulation being proposed.

Sawers said the regulator had held up the example of Sweden as a deregulated postal service but pointed out that the Scandinavian country's experience had been a salutary lesson.

Prices to customers had risen by 75 per cent and the service had actually worsened, said Sawers.

"It needs to be a much more clearly calculated and staged change when it is introduced," she said.

"The regulator's current proposals could push the business into crisis."

The Royal Mail in Scotland handles about eight million letters every working day, with 90 per cent of first class letters posted north of the Border for delivery within Scotland being delivered by the next working day.

Postal services come under the control of Westminster, but it is understood that some MSPs are so concerned about he possible effect of the regulatory shake-up that they are to poised to ask Martin Stanley, the chief executive of Postcomm, to appear before a Scottish parliamentary committee.

Consignia executives say they are frustrated at the tenor of the regulator's suggestions at a time when the company is trying to become a more commercially focused business.

It aims to establish itself as one of a handful of key global distribution companies following the expected increasing consolidation of the market.

Meanwhile, the threat of a national mail strike receded on Friday after Consignia and the Communication Workers Union struck a new deal on pay.

The union's executive will decide on Tuesday whether to recommend the deal, which would give employees a rise from a basic of £253 to £300 a week. The dispute had threatened the first national post strike in six years.