Tag: Royal Mail

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”.

Ministers are set to back Royal Mail’s plans for employee share ownership next week in a move that will trigger a showdown with Labour backbenchers and unions who have condemned the scheme as a partprivatisation of the service. The Times has learnt that Gordon Brown, the Chancellor, and Alistair Darling, the Trade and Industry Secretary, are preparing to endorse the controversial plan as they sanction up to pounds 2 billion in state cash for the organisation next Thursday, when Royal Mail reports profits of more than pounds 600 million.

Royal Mail will also prepare the ground for employee share ownership early in the week when it announces the number of responses to a letter to the 180,000 staff from Allan Leighton, the chairman, asking them if they want free shares. Royal Mail executives are confident that they have a strong number of registrations for shares and may release the number on Monday.