Tag: Royal Mail

The Conservatives have signalled their opposition to the partial privatisation of the Royal Mail, increasing the political difficulty for the government of accepting the plan favoured by the group’s management. Speaking to the Financial Times, David Willetts, the new shadow trade and industry secretary, said he was “sceptical” about the proposal to transfer a majority stake in the state-owned postal operator to its staff. He warned that the Royal Mail could end up being neither politically nor commercially accountable, in a “sort of limbo, where there’s nobody putting them under pressure to perform”. Ministers are still considering whether to cede to pressure for the scheme from the postal operator. Any such change would require approval by MPs – Tory opposition, allied to a likely Labour rebellion, could make such a vote hard for the government to win.

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.

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. Executives see sorting out the pension liability as fundamental to Royal Mail’s next move because it needs to restructure its balance sheet before making substantial borrowings.

Royal Mail is to abandon all but its first and second class postal products and replace them with services it believes serve better the needs of its mostly commercial customer base. The move by Royal Mail, which yesterday reported record operating profits of Pounds 537m and an improved performance, is aimed at defending its market share before the industry opens to full competition in January. Testing of the new products on customers is to begin in June with an eye to a launch before the new year competition deadline. Royal Mail would not give details of the products but they are expected to focus on guaranteed delivery at specific times rather than speed. For instance, a mailshot delivery might be split over weeks rather than at once. Adam Crozier, chief executive, said: “Most of our (current) targets are based on speed but most of the time this isn’t what our customers want.”