Year: 2005

Royal Mail is set to lose some of its biggest and most lucrative customers with a string of government departments, high street banks and insurers preparing to defect to rival postal operators.

The Department for Work and Pensions (DWP), the Inland Revenue and several large banks are understood to be close to switching from Royal Mail to one of the new breed of competitors which have moved in after the liberalisation of the pounds 5.8bn postal market.

Losing the DWP, in particular, would be a serious blow for Royal Mail as it is the biggest postal user of any Whitehall department. The DWP has already removed about pounds 400m of business a year from Royal Mail by paying state benefits direct into bank accounts rather than through the Post Office branch network.

A row is set to break out this week as the postal services watchdog Postwatch accuses Royal Mail of misleading the industry’s financial regulator.

The charge comes days before the regulator Postcomm publishes its initial proposals on how much Royal Mail can charge for deliveries for the three years beginning next spring.

Postwatch, whose relations with Royal Mail under chairman Allan Leighton have been strained since it advised customers not to use first- class post over the Christmas rush, claims Royal Mail exaggerated the threat it faced from competition in order to get a lenient regulatory settlement last time around, in 2003.

The dispute focuses on forecasts made by Royal Mail for mail volumes, a key driver of its profits, which it said would suffer from the introduction of competition.

Alan Johnson, the Secretary of State for Trade and Industry, has pledged to reject plans to part-privatise the Royal Mail.

The claim is made by Billy Hayes, the general secretary of the Communication Workers Union (CWU), who met Mr Johnson on Tuesday.

The news comes after weeks of speculation that Mr Johnson was warming to Royal Mail proposals to turn the state-owned business into a John Lewis- style partnership.

But Mr Hayes said: ‘Alan Johnson said that the Government would stick to the manifesto commitment and keep Royal Mail in the public sector. He said that he had no plans to renege on that.’

Allan Leighton, chairman of Royal Mail, wants to part-privatise it, by buying 51 per cent of the company from the Government, and hand shares to the workers.

With the time for raising objections to Royal Mail’s PIP deadline running out, many of those affected flocked to Postcomm’s summit last week to make their final plea. Sebastian Burford reports on whether they made a convincing argument

Postcomm’s pricing in proportion (PIP) summit, held in London last week, was billed as the last chance for the industry to voice its concerns, with more than 130 delegates gathering from all corners of the UK to vent their spleens at Royal Mail’s proposed scheme.

It may be more than three years since Royal Mail revealed plans to introduce size-based pricing (PM May 24 2002), but the controversy refuses to go away.

Since Postcomm entered its first consultation period on the changes last year (PM April 2, 2004), some 10,000 representations, including 130 individual responses, have been received – an unprecedented number for the industry regulator.

Postwatch has won the right to seek a judicial review of regulatory body Postcomm’s decision not to enforce Royal Mail’s compensation scheme, after the High Court ruled in its favour.

It means the postal operator could be forced to shell out the GBP30m it still owes customers.

All three public bodies were required to submit evidence to the court.

A review date has not been set, but a judge will consider the legality of Postcomm’s decision not to take action against Royal Mail when it failed to meet all 15 of its standards of practice last year, resulting in the debt. A Postwatch spokesman explains: “Going to court has always been a last resort. It’s certainly not something we’re entering into lightly. However, there’s no other option available.