Year: 2005

Congratulations to Allan Leighton and the rest of the management team at Royal Mail for turning a deficit of Pounds 318m four years ago into a Pounds 537m surplus last year. They also deserve praise for paying a Pounds 1,074 bonus to the group’s staff – a sensible reward for their co-operation with a remarkable transformation. The next step must now be to take Royal Mail into the private sector, but Mr Leighton’s ingenious strategy for winning government backing risks an imperfect privatisation.

Royal Mail’s turnround was helped by increases in stamp prices that added more than Pounds 400m a year to revenues. But there has been real progress on service targets following the ending of the second daily delivery. Some 33,000 jobs have been shed – about 14 per cent of the workforce – as part of an overhaul of the group’s distribution and retail network.

Allan Leighton, the chairman of the Royal Mail, is trying to persuade the Government to take on part of its pension bill so that he can proceed with a partial privatisation of the business.

Royal Mail is trying to shift Pounds 1.5 billion of its Pounds 2.5 billion pension liabilities on to the Government’s books as a crucial step towards the partial sale.

The postal group, which declared annual operating profits of Pounds 537 million yesterday, wants the Government to take responsibility for 220,000 existing pensioners of the scheme, which started in 1969. That would strengthen Royal Mail’s balance sheet and enable it to raise up to Pounds 5 billion from banks and the market. Royal Mail executives and the Department of Trade and Industry have already held talks and the issue will be a key part of a DTI review into the impact of competition on the state-owned group.