Sense of comfort may return to taunt UK Royal Mail

Royal Mail executives may take some comfort from the expected sale of the mail operation of Hays, one of its few new domestic rivals.

However, most observers expect that the mail business, which is profitable and thought likely to fetch between Pounds 350 million and Pounds 450 million, would provide stiff competition, even if it were placed under new ownership.

Hays has a licence to compete against Royal Mail in some business services and will be anxious to make the most of that asset. The company has an established document exchange service and has been building up specialist business services from its existing client base to nibble away at Royal Mail’s domain.

Potential buyers are already thought to be circling, even though Hays has put a two to three-year timeframe on the sale. It has believed that when Colin Matthews became chief executive last year, would-be buyers such as Deutsche Post, the Dutch group TPG and the UK’s Business Post began sizing up the mail operation.

Paul Carvell, chief executive of Business Post, said that his board would run the slide rule over the Hays business. TPG and Deutsche Post would not comment.

Hays’s mail and express business differs from that of the other contenders in the newly deregulated UK postal market in that it is concentrating on first-class, value-added services for business rather than bulk services.

However, it has not yet ruled out entering the market for sorting and delivering greater quantities of mail.

Business Post is encouraged by suggestions that Royal Mail may be allowed to charge only 14p to rivals for access to its network. But the postal regulator has made no formal ruling on the charge and Royal Mail is expected to contest the fee.

Hays’s mail service, along with Business Post and TPG, has also been leading an attack on Royal Mail over its exemption from VAT, arguing that this gives it an unfair advantage.