Tag: Europe

The Government today maintained it had not made any decision on whether to back a Royal Mail plan to issue shares to its workers. The idea, strongly supported by Royal Mail chairman Allan Leighton, has alarmed the Communication Workers Union, which believes it would be a first step to privatising the postal service. New Trade and Industry Secretary Alistair Darling said today he would not be rushed into making any decision on whether to support the move. He said: “I have taken no decision at all. I am only 10 days into this job and I will not be rushed into any decision.” Mr Darling said he will be meeting Mr Leighton soon to discuss the shares issue.

Royal Mail will reveal this week that its pension-fund deficit has swollen from pounds 4.4 billion to pounds 5.5 billion, a figure that will put further pressure on the government to pump extra money into the group. The huge rise in the deficit, which has resulted from an actuarial review on mortality rates, will accompany full-year results that will show profits rising to pounds 600m. To address the bigger hole in the pension fund, Royal Mail will have to increase its annual contribution from pounds 600m to pounds 800m. Allan Leighton, Royal Mail’s chairman, is due to meet Alistair Darling, the new trade and industry secretary, early this week to allay any concerns the government may have in funding a pounds 2 billion rights issue.

Ministers are expected to give the go-ahead for public investment in Royal Mail, the state-owned postal operator, after being convinced by executives of the need for new technology and equipment. But a decision remains some way off on whether to endorse a controversial share-ownership scheme for company employees that has been proposed by Allan Leighton, its chairman. Royal Mail has been lobbying ministers, arguing that it desperately needs Pounds 2bn of fresh investment in new equipment to survive in a fully liberalised postal market. It has a Pounds 4.5bn pension deficit that executives believe could swell further. After long talks between the company and the Department of Trade and Industry and consultation with the Treasury, next week’s announcement of Royal Mail’s 2005 results is expected to provide an indication of the scale of probable government support and the conditions that will be attached. Talks between ministers and Royal Mail were said by one person close to the negotiations yesterday to be “fluid”.