Hasty introduction of competition will trigger more job losses, Consignia warns

Any hopes that the political fall-out from the 15,000 job cuts announced by Consignia would be limited to one embarrassing ministerial statement in the Commons were dashed yesterday when management threatened yet more redundancies if competition was introduced too quickly.

Appearing before the public accounts committee, John Roberts, Consignia's chief executive, said that proposals to end the post office group's monopoly within weeks would add another Pounds 750m to its mounting losses and necessitate a further 15,000 job cuts.

Officials later struggled to make clear whether this threat was in addition to the question mark hanging over another 25,000 staff which had earlier given rise to a suggested total of 40,000.

Given the way that redundancy targets have grown almost as fast as Consignia's losses in recent months, it would be feasible to assume that this latest threat meant 65,000 jobs, or 30 per cent of the group's 220,000 employees, were now theoretically under threat. But the simple answer is that no one knows where this restructuring process will end.

Speaking in an interview, Allan Leighton, Consignia's newly confirmed chairman, said his priorities were restoring the group to profitability through cutting "at least" Pounds 1.2bn from annual operating costs. He said it was impossible to say how many people might be employed by the group at the end of this three-year restructuring because it was difficult to predict how natural staff turnover would alter as a result of the generous voluntary redundancy terms on offer.

So far, the only clear job figures were contained in yesterday's statement outlining plans to restructure Parcelforce and make sweeping changes to Royal Mail's transport strategy. With existing schemes to slim management and support services departments, Consignia has confirmed there will be 13,000 redundancies or redeployments and about 2,000 positions lost through natural staff turnover.

This will save a total of Pounds 460m, most of which stems directly from the closure of 50 Parcelforce depots and a decision to end the sorting of mail on night trains.

Bigger savings are still being identified within Royal Mail, where managers are experimenting with a scheme to scrap daily second deliveries and prioritise morning deliveries for business users. Until this is complete, Mr Leighton said it was premature to speculate on the total number of redundancies or the short- term restructuring cost.

The chairman insisted that what was left of Parcelforce would be profitable within three years, but he also spoke of the need to "grow revenues" across the group. The delivery of non-urgent business parcels which Parcelforce intends to stop offering under yesterday's restructuring accounts for some 60 per cent of the division's total revenues.

Until Mr Leighton can show where future growth might come from, it is difficult to see how the current plans will prevent Consignia shrinking to a pale shadow of its former self. Editorial Comment, Page 20 Peter Martin, Page 21 www.ft.com /consignia

How Parcelforce's three-day service failed to deliver

Parcelforce, which is losing Pounds 15m a month, has been in the sick bay for some time, writes Sarah Laitner. The services it offers – deliveries taking three days or more – no longer meet the market's needs.

Despite delivering 150m parcels a year, it has been wounded by maintaining an infrastructure designed for non-time-guaranteed services, which customers do not want and which it cannot make profitable.

Consignia admitted yesterday that its parcels strategy had "developed in a piecemeal fashion and has lost sight of market and network logic".

Rival operators, however, have kept their eyes firmly on the deregulated market and have successfully muscled in.

Analysts say Parcelforce has failed to adapt to competition. "Three to four-day delivery may just have been acceptable about four or five years ago but from the early 1990s onwards all its rivals have been offering a next-day service," said John Manners-Bell, lead analyst at Datamonitor.

Amicus, the trade union, blamed Parcelforce's woes on a "flawed strategy of chasing volume in the business parcels market at knockdown prices".