UK union threatens £1.4bn business mail market over TNT Post trial

Britain’s major postal union has threatened to block mail from Royal Mail’s private sector competitors from reaching UK households, in protest against the continuing liberalisation of the postal market. The Communication Workers Union said today that it will hold a vote among members in the New Year over a boycott of the entire GBP 1.4bn Downstream Access market.

The boycott would affect about 44% of all letters in the UK postal system, and about 75% of all bulk mail – around 7.2bn of the 16.4bn letters delivered each year in the UK.

The union is protesting against the “mismanagement” of the way Britain’s postal market has been opened up to private sector competition since 2006, under European postal laws.

In particular, the CWU is angry about one of Royal Mail’s largest rivals, PostNL subsidiary TNT Post UK, starting up trials delivering mail direct to households within West London.

The union said today that the new competition from TNT Post was “unfair” to the former monopoly holder, and that Royal Mail was losing jobs as a result, with workers hired by TNT Post on much lower wages.

It said its ballot would mean “any mail sent by a company other than Royal Mail would not be delivered”.

The boycott will be put in place if there is “no progress” from postal regulator Ofcom on the issue of competition, said the CWU.

Dave Ward, the CWU deputy general secretary, said today that if TNT Post is allowed to continue “cherry picking” Royal Mail’s most profitable routes, it could be “catastrophic” for the financial sustainability of the universal postal service in Britain.

He said today: “We’re not prepared to stand by and watch the jobs of our members be ruined by unfair competition which could be avoided. Boycotting parts of the mail which are damaging services is a proportionate response to the threat posed by unfair competition.”

If CWU members blockade the entire Downstream Access system, it would mean the loss of about GBP 1.3bn in annual revenues for Royal Mail.

Royal Mail told Post&Parcel today that although it is concerned about the impact of “unfettered” direct delivery competition on its business, it was important that the mail continues to be delivered.

A Royal Mail spokesman said: “All of the mail that we handle is important to us and needs to be delivered, as we always do, six days a week. It is vital to all of us at Royal Mail, to Royal Mail as a business and most importantly to our customers, that the post is delivered.”

TNT Post

TNT Post UK has been running delivery trials in West London since mid-April

TNT Post UK has been delivering letters through the Royal Mail network since securing its postal operator’s license as a “Downstream Access” company in 2003-04.

As a “Downstream Access” company, it collects and sorts more than 3.6bn pieces mail a year from businesses before injecting them into the Royal Mail network for the final stage of delivery.

TNT Post currently claims to handle about 22% of all UK mail.

Earlier this year the company began trials to deliver mail across the whole chain, from collection to final delivery within West London households. The trial followed a similar test in Liverpool in 2009, and aims to see whether TNT Post can deliver the mail cost effectively despite the fact that Royal Mail as universal postal service is exempt from VAT, and can charge businesses 20% lower rates.

The problem for Royal Mail and the CWU is that in the existing Downstream Access system, around 80% of the revenue in the mail system is retained by Royal Mail when its competitors collect and sort letters before handing them over for last mile delivery. If rivals provide the last stage of delivery, Royal Mail loses all of the mail revenue for the volumes concerned.

According to Ofcom’s latest figures, the Downstream Access market generates GBP 1.3bn a year in revenues for Royal Mail, while its rivals make only GBP 153m in annual revenues. Royal Mail currently makes GBP 5.3bn a year from its end-to-end delivery.

CWU campaign

The CWU, which represents 200,000 members in the communications industry, not just Royal Mail workers, launched its campaign at a private industry conference in London today, at which members of the press were kept out.

It criticised Ofcom for allowing TNT Post to run its services without meeting the same quality standards that Royal Mail faces as universal service provider, and also hit out at TNT Post’s wage levels.

“Competitors are not currently required to meet any regulated service standards”

Billy Hayes, the CWU general secretary said today that competition was an “old-fashioned” theory that had had its day.

“What’s important is decent services and jobs and that’s what we’re standing up for,” he said.

The CWU suggested it was “not a coincidence” that thousands of Royal Mail jobs had been lost, and various mail centres and delivery offices closed since the UK postal market began to be opened up in the year 2000.

The union accused TNT Post of paying workers below a “living wage” in London, stating that TNT was paying delivery staff GBP 7.10 per hour in London, while a “living wage” was currently seen to be GBP 8.55 per hour and Royal Mail pays GBP 11.67 per hour in London. The minimum wage for October 2012 was GBP 6.19 per hour.

The TNT Post spokesman declined to comment on the wage claims, neither confirming nor denying the amounts cited by CWU.

The company also did not comment about the union’s claims of “unfair” competition.

“We disagree with the comments made in relation to TNT Post in this matter,” the spokesman told Post&Parcel.

UK postal regulator Ofcom said last month it was keeping a close eye on the development of end-to-end competition in the UK market. If it believes services like TNT Post’s do pose a threat to the universal service in the UK, it does have the legal powers to impose service quality requirements like a six-day-per-week standard, or require Royal Mail competitors to pay into a central fund to support the universal service.

Ofcom is currently consulting on its draft guidance for handling end-to-end competition, until 9th January 2013.

Royal Mail said today that it was concerned with the potential for its rivals to cherry-pick its higher density, more profitable routes in urban areas, but said it did support competition “on a level playing field”.

Its spokesman said: “Competitors are not currently required to meet any regulated service standards, and do not need to maintain the high, fixed cost network that Royal Mail needs to fulfil its obligations. We will be responding to Ofcom’s consultation on Direct Delivery in due course.”

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