Consignia given assurance of government rescue package

Consignia, the loss-making post operator, has been assured by ministers that it will get a rescue package good enough to guarantee its future.

The move yesterday by Patricia Hewitt, trade and industry secretary, holds out hope to the renamed Post Office that it will receive an injection of government funds out of the ý1.8bn it paid to the Treasury when it was profitable in the 1980s and 1990s.

Consignia executives had warned that, without a “statement of comfort”, the company technically would be trading insolvently and could not sign off its accounts.

But officials at the Department of Trade and Industry said further talks had taken place. They indicated that there would be no problem in sorting out Consignia and that it would not become insolvent.

The DTI said: “Consignia and the government have been engaged in discussing questions concerning the financial structure and funding of the business.

“The outcome of those discussions will enable the company to carry out its restructuring plans and give the company a satisfactory basis on which to face the future.”

The deal will be announced after the Commons reassembles on June 10, along with Consignia’s accounts and the next wave of restructuring, involving 15,000 job losses at the Royal Mail.

Allan Leighton, Consignia chairman, is expected to announce losses approaching ý1.3bn. Under his three-year plan to turn the business round, he aims to make Consignia profitable by 2005, cutting ý1.2bn from cost with 30,000 redundancies and the scaling-down of its Parcelforce subsidiary.

Mr Leighton can raise cash by borrowing money or generating funds from Consignia’s property assets, but wants government help to generate enough cash.

Ministers expect that Postcomm, the postal regulator, will water down this week plans to open the market to competition. The regulator has faced criticism of the speed of its proposals, which would open the UK market to competition ahead of the rest of Europe.

In a letter to Postcomm, Ms Hewitt pressed the commissioners to “consider very carefully as to the size and timing of market opening”.

In January, Postcomm set out proposals to open the whole of the letters market to competition by spring 2006, starting with the lucrative bulk mail business market. It is expected to delay competition, with full liberalisation by spring 2007 an option.

The regulator is also likely to agree a rise of at least 1p on the cost of a stamp, although Consignia has warned that a 1p rise might not be enough to stave off a crisis caused by the ending of its monopoly.