Consignia to cut 40,000 jobs to avert crisis
By Dan Roberts, Industrial Editor, in London
Published: March 24 2002 20:42 | Last Updated: March 25 2002 11:06
Consignia will shed 40,000 of its 200,000 staff under rapidly escalating plans to save the state-owned UK post office group from a financial crisis. Ministers are expected to come under pressure to justify the radical proposals, as the target disclosed for job losses mounted steadily.
Allan Leighton, the new chairman of Consignia, on Monday confirmed that 15,000 jobs will go in the first stage of a restructuring focused on the loss-making parcels division, Parcelforce. However, people familiar with the plans on Sunday night confirmed that the eventual total could climb to 40,000 – far beyond the worst fears until now – once the next stage is announced after Easter.
The cuts are the result of a continuing review of the Royal Mail, Consignia's largest division, and includes 30,000 jobs lost through redundancies plus a further 10,000 positions which will disappear through natural wastage and the outsourcing of support services such as transport.
The second stage of the restructuring has yet to be confirmed but the plans are at an advanced stage and will alarm union leaders who fear some of the redundancies may be compulsory. It follows existing proposals to close thousands of post office branches and an admission that the new management would like to change Consignia's name following the failure of attempts to rebrand the group. Among the other elements of Monday's first stage, Consignia announced it is pulling out of the market for delivering non-urgent business parcels in the biggest admission yet that the government-owned postal group is failing to compete with the private sector.
Mr Leighton, who is expected to be confirmed as the group's permanent chairman, will argue that Consignia's parcels division, Parcelforce, is losing too much money to continue serving all customers.
Instead it will concentrate only on express deliveries and the basic parcel services for domestic customers required under its universal service obligations.
The retreat will result in the loss of nearly half of Parcelforce's 12,000 jobs, slightly more than had been expected when the threat of substantial job losses emerged on Friday.
The announcement will also be accompanied by news of a review of the Royal Mail's transport strategy. The review has concluded that it should renegotiate long-standing contracts with EWS, the rail freight company, and rely on cheaper road haulage instead.
Another element of the transport review involves outsourcing the Royal Mail's fleet management division. This employs about 2,000 staff and negotiations are under way to share costs with British Telecommunications. However, the cutbacks are only intended to be the first stage in management plans to find savings of £1.2bn ($1.7bn) in operating costs.
Consignia is not expected to reveal further details of its plans to cut costs within the Royal Mail, the biggest of its three divisions.
All the job cuts announced on Monday are thought to involve voluntary redundancy or the transfer of staff. Details will be given to Consignia's 200,000-strong workforce on Monday morning.
On Sunday, the Communication Workers Union said it would wait to see Consignia's plans but promised to resist compulsory redundancies. It was confident of being able to protect members.
Parcelforce has not made a profit for 10 years and is responsible for a disproportionate amount of Consignia's losses of £1.5m a day. Managers had considered closing the express parcels business too, but the unit remains relatively profitable.
