Consignia retreats from the parcels business as 11,000 jobs are set to go
Consignia will today pull 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.
Allan 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. This has concluded that it should renegotiate long-standing contracts with EWS, the rail freight company, and rely on cheaper road haulage instead.
Another previously announced 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.
Together with existing plans to cut management positions and sales jobs, and the 5,000-6,000 employees leaving Parcelforce, the outsourcing plans mean that Consignia’s total workforce will shrink by an estimated 11,000 as a result of tomorrow’s announcements.
However, the cutbacks are only intended to be the first stage in management plans to find savings of Pounds 1.2bn 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. Unions fear these could bring the number of job cuts to 30,000 and may involve compulsory redundancies, which they have promised to fight.
The 11,000 announced today are all thought to involve voluntary redundancy or the transfer of staff. Details will be given to Consignia’s 200,000-strong workforce this morning.
Yesterday, 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 Pounds 1.5m a day. Managers had considered closing the express parcels business too, but this is relatively profitable.
Last year, Parcelforce delivered 140m parcels but it is unclear how much of this will be lost if it stops competing for non-express contracts.
