Consignia to outsource buildings maintenance
Consignia is in talks to outsource maintenance of its buildings as part of its three-year plan to cut costs and return to profit, it was announced today.
The postal group said it was in talks with engineering group Balfour Beatty to conclude a partnership for its facilities management business Romec, which is responsible for day-to-day maintenance of its 3,000 buildings.
Under the deal, the pair would create a joint venture with Consignia owning a 51% share of the new business.
The new company would then be awarded a seven-year, #1 billion contract to provide services such as office cleaning and security camera maintenance.
Romec's 5,000 staff _ including skilled engineers, cleaners and other specialists _ would transfer to the new company on existing terms and conditions.
A spokeswoman for Consignia said there would be no job cuts as a result of the deal.
Consignia _ which is losing more than #1.5 million a day _ said outsourcing of Romec and other parts of its support services was part of a three-year plan to return the postal group to profitability.
Outsourcing would improve support services which were not core to the postal network, and would save #60 million a year.
Consignia last month announced plans to cut costs by #1.2 billion and axe 15,000 jobs by restructuring Parcelforce.
Malcolm Kitchener, Consignia's managing director of business services, said today: "Outsourcing will help to reduce costs, increase efficiency and give our people fresh opportunities within new companies.
"Romec already operates outside of Consignia with significant external contracts won with major retailers, banks and public sector organisations.
"By joining forces with Balfour Beatty, the joint venture will be in a stronger position to bid for even larger and more diverse contracts."
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CONSIGNIA DEAL SETS OFF STRIKE THREAT
THE threat of a national postal strike re-emerged yesterday as Consignia, the re-named Post Office, said it would hand management of its buildings to a private firm.
Postal workers are angry that 5,000 staff will be transferred to the private sector under the plans, which follow the announcement of 15,000 job losses last month and moves this week to close a third of Consignia's 9,000 urban post offices.
Workers believe the move represents the creeping privatisation of the Post Office. Billy Hayes, general secretary of the Communication Workers Union, said he would consult with branches over whether to call for strike action.
The Pounds 1 billion deal will see Balfour Beatty, the engineering firm, take over Romec, the Post Office's facilities management division, to create a new joint venture company. The new company, in which Consignia will retain a 51 per cent stake, will be awarded a seven-year contract to maintain the group's 3,000 buildings.
The deal is part of a programme to shave Pounds 60 million a year off costs by outsourcing. But union leaders are concerned about the expected cost savings and said yesterday that they had received no assurances that jobs would be protected.
"This joint venture will do nothing to improve the service and is the result of a discredited dogma that believes private is good and public is bad. It is bizarre that in order to get to grips with a huge deficit, the Post Office decides to get rid of one of the few parts of the organisation that has consistently made profits and hit targets," Mr Hayes said.
Consignia revealed the deal as it called on the postal regulator to allow it to raise the price of first-class and second-class postage by a penny a letter. The appeal came as part of Consignia's response to the postal regulator's proposals gradually to remove the Royal Mail's postal monopoly.
The postal group said that raising the cost of postage by a penny would generate extra revenue of Pounds 170 million. Consignia is currently losing Pounds 1.5 million a day and wants to make savings of Pounds 1.2 billion over three years.
Allan Leighton, Consignia's chairman, said yesterday that price rises were necessary to protect the universal postal service, under which letters are delivered anywhere in the UK for a single price.
Mr Leighton said: "The scale and speed of Consignia's renewal plan is challenging by any commercial standards and unprecedented for Consignia. Our key concern is that there is a real risk that ability to provide the universal service will be undermined."
Consignia said that the cost of first-class postage had increased by just 7 per cent since 1993, compared with retail price inflation of 25 per cent in the same period. After a penny rise, UK postage rates would continue to be among the lowest in Europe.
However, the postal group said further rises might be necessary if competition is introduced in the next six months, as the postal regulator hopes.
According to Consignia, annual price rises in excess of inflation would be needed to ensure continuity of the universal service. Consignia said yesterday that annual price rises of 3p could not be ruled out, despite the fact that customers were likely to switch to other services if Royal Mail prices rose by this amount.
PostWatch, the consumer postal watchdog, criticised the proposed price rises, saying it was unacceptable for consumers to pay for the management's failings.
