Royal Mail at risk from watchdogs

Royal Mail chairman Allan Leighton is heading for a showdown with regulators over calls to break up the postal service as part of plans to increase market competition.

Mr Leighton is likely to warn a trade and industry select committee tomorrow that an enforced separation of the delivery network, including all postmen, from the rest of the group could spell disaster for its three-year recovery plan.

Royal Mail insiders believe highly regarded Mr Leighton may even resign if further controls are placed on what he sees as an already over-regulated body.

“The chairman just wants to be left to get on with turning the business around,” said a Royal Mail spokesperson.

The row has erupted just as Mr Leighton is entering the final stages of the search for a new chief executive to see through the Royal Mail’s recovery plan. An announcement about that role is expected within 10 days; it is understood there are three or four strong candidates for the job but no clear favourite.

The Royal Mail was unable to comment on reports that the former Football Association chief executive, Adam Crozier, is in the running.

The pressure to break up the Royal Mail is coming from the consumer body Postwatch, which wants industry regulator Postcomm to encourage sector competition and better rates for consumers.

Unless the Royal Mail’s 1,400 sorting offices and 80,000 postmen are separated and set up as an independent unit offering a door-to-door delivery route to all postal suppliers, other firms will be unable to compete in any genuine sense, Postwatch believes.

“We want to see a strong Royal Mail but we also want to see other entrants providing real competition in the market,” a spokesman said.

However, it is thought Mr Leighton believes a lengthy regulatory investigation into a possible break-up of Royal Mail would sidetrack senior managers at a time when they are battling to save the group.

“We’ve already got enough on our plates trying to save this business without more meddling from the regulator,” said a Royal Mail insider.

“It would create huge uncertainty over the business’s future, making it a real possibility that we won’t be able to save it. [Mr Leighton] won’t stand for that.”

Postcomm yesterday insisted that it had no plans to look at a break-up but could not rule out investigating the possibility in future. Talks are taking place now to set the price at which Royal Mail should offer rival operators access to its delivery network.

Regulators are thought to want to see whether a deal on pricing is achievable before deciding on an investigation into a possible break-up.