UK Postal workers set for bonus after finances boost

Postal workers are on course for an £800 bonus after the Royal Mail today reported a huge improvement in its finances and more reliable deliveries.

The postal organisation is making £1 million a day – as opposed to losing the same amount two years ago – and is delivering more than nine out of 10 first class letters the following day.

But chairman Allan Leighton admitted that “tough decisions” would still have to be taken to keep the group on course for a full-year profit of £400 million, which will trigger the payouts to staff next year.

He also disclosed the scale of the Royal Mail's pensions deficit as £2.5 billion, one of the biggest in the country.

The firm will have to spend £500 million a year to pay off the deficit on top of £300 million a year to maintain its final salary pension scheme.

Chief executive Adam Crozier said the group was being “transformed” under a massive modernisation programme which had delivered profits of £217 million in the first half of the current financial year.

Consumer watchdog Postwatch complained that the Royal Mail had failed to achieve 14 of its 15 performance targets and that compared with the same period last year services had deteriorated.

The delivery of first class letters had got worse over the past year and more than 200 million first class letters were not delivered the next day during the first six months of the current financial year.

Postwatch chairman Peter Carr said: “Customers are facing new price increases while service standards continue to fail the targets, yet Royal Mail profits are expected to double to £400 million-plus.

“Customers are paying for the profits without receiving the service. Prices should not increase until service standards are achieved.”

The target for delivering first class mail has been missed every year for 10 years but was now improving, while the number of letters lost every year had been halved from 30 million in 2001-2002.

More than 34,000 workers have left the Royal Mail and hundreds of post offices have closed since the Royal Mail launched its renewal plan, which has achieved savings of more than £1 billion.

Mr Crozier complained about the number of targets the Royal Mail had to face, pointing out it had 14 linked to delivery of letters compared to just two in Germany and one in Holland.

The Royal Mail was still losing an average of 5p on first class letter delivery and 9p on second class stamps while business mail was subsidising domestic deliveries.

About 2,400 offices will have been closed by the end of the current financial year – 600 fewer than originally planned following consultations with customers.

The number of first class letters delivered a day after posting was 92.1% in the three months to September, almost 4% better than the quarter to June and one of the best performances of the past decade, although still below the target of 92.5%.

Second class deliveries were 98.6%, above the target of 98.5%.

The letters business made a profit of £261 million in the half year, £89 million more than the same period a year ago, while losses at Post Office branches fell from £90 million to £52 million.

Wigan was the best performing area in the UK with 93.8% of first class mail delivered the next day, closely followed by Sheffield (93.6%) while Oxford was the worst performing at 80.6%.

Communication Workers Union general secretary Billy Hayes said: “Our members have been getting a lot of unfair criticism in the media of late and it is time they receive some recognition for the contribution they have made to turning the company around.

“The union's position, however, has long been that an improvement in the company's finances was inevitable. That was always going to be the easy bit, given the slashing of jobs and the change to the single daily delivery that has occurred.

“What we now need to see is a management more committed to improving the quality of service – because, while some improvements have undoubtedly been made, clearly more needs to be done, particularly to sort out problems that remain at the sharp end on delivery.”

Malcolm Bruce, Liberal Democrat Trade and Industry spokesman, said: “So far so good, but this must be sustained by Royal Mail.

“The group now needs to meet its performance targets. For customers this will be the litmus test on whether the Royal Mail has got its act together.

“Considering they failed to meet any of their 15 targets in August 2004 this will be significant challenge.”