Push to partly privatise the UK postal service

Allan Leighton, Royal Mail chairman, will push for a meeting with ministers this week to discuss a John Lewis-style partial privatisation of the state-owned postal operator in which staff would gain a stake.

The plan is for Royal Mail to borrow an extra GBP 2 billion against its balance sheet. Part of the cash would be used to buy a slice of the government’s 100 per cent shareholding held on behalf of staff in an employee share ownership trust. A further section of the capital would be allocated to address the GBP 2.5 billion pension deficit.

Royal Mail is set to report record results tomorrow with annual operating profits in excess of GBP 500 million, compared with GBP 220 million 12 months ago, and a significantly improved delivery performance.

This is well ahead of previous estimates and will enable Royal Mail to pay each of its 195,000 postal staff and other employees a bonus of more than GBP 1,000.

When Mr Leighton initiated the recovery plan three years ago, the organisation was losing more than GBP 1 million every working day.

“Three years ago, Royal Mail was worth zero. Today it is worth around GBP 5 billion,” a Royal Mail executive said.

The government, which made an election manifesto pledge that there were “no plans to privatise” Royal Mail, is unlikely to make an announcement on the postal operator’s future quickly.

However, it has promised to undertake a review of the impact on Royal Mail of the introduction from January of full competition to the UK postal market.

Senior Royal Mail executives believe that this could be launched soon and would give Alan Johnson, the new trade secretary, a justification for selling part of the postal operator.