UK Post Office plans sale of some larger branches to retailers to cut costs
The Post Office is planning to sell some of its large High Street branches to convenience store companies in an effort to cut costs and start making profits in the current financial year.
The loss-making group said it was reviewing the future of its 557 directly-owned Crown Offices, which lose Pounds 65m a year thanks to soaring rents and labour-intensive working practices. The Post Office is also in the process of closing 3,000 urban sub-post offices, which are owned and operated by private business people, as it says there is overcapacity in the network.
The Post Office said about 50 of the Crown Offices would be sold off to retailers, including convenience store chains such as Londis, but that a smaller Post Office franchise could be operated from some stores. It denied reports that a decision would soon be made by the state-owned group on whether to sell the entire Crown Office network. “This is a gradual review process, and has been ongoing for quite a while.”
About 80 per cent of Crown Offices are rented, and the group said that rental costs had been rising steadily because of the prime locations the offices often occupied. The branch in Trafalgar Square, London, generated the biggest revenues of any post office in the country but also made the biggest losses. “The cost involved in keeping a Crown Office open is so high you soon lose sight of commercial viability,” it said.
The Post Office, part of the Royal Mail Group, was until recently making losses of between Pounds 200m and Pounds 300m a year but it hopes its cost-cutting measures and a roll-out of new financial services can generate a profit of Pounds 50m in 2004-05.
Thousands of back-office jobs have been cut, and the urban sub-post office network is to shrink to 5,500 branches, from 8,500 in 2002. Many of these closures have provoked fierce local protests, although the Post Office insists that in most cases there is another branch within a mile. Rural post offices, however, are being preserved with the help of an annual Pounds 150m government subsidy.
David Mills, Post Office chief executive, said a serious problem for Crown Offices was the poor use of space. Many used to include sorting offices, but this activity had since been moved to larger depots, leaving floors unused . “We will look at each site and see how we can make more productive use of it,” he said, but added that security factors might prevent the group renting office space to other businesses.
Some Crown Offices might be moved to nearby but cheaper premises and remaining offices would be refurbished to bring them up to date and make them more attractive to customers. “Every high street is different. But you don’t maintain the status quo if it doesn’t work,” said Mr Mills.
