Royal Mail Sell-Off Moves a Step Closer

11 July 2011

The privatisation of the Royal Mail could begin this summer, as the proposals formally allowing the sell-off have been passed by MPs. The plans protect the so-called universal postal service in its current form for at least the life of the current Parliament. The Post Office network will remain unchanged, and the Government will assume responsibility for the Royal Mail pension scheme’s £8.4bn deficit.

Ed Davey, minister for postal affairs, said the proposals “safeguard the future of both Royal Mail and the Post Office – two cornerstones of British life”.

Despite those guarantees, unions are still warning of an uncertain future for the postal service. Billy Hayes, general secretary of the Communication Workers Union, told Sky News: “The fact of the matter is the British public don’t want to see the Royal Mail privatised. ” Vince Cable is flogging this company to the very people he denounced at the Liberal party conference – the spivs, the speculators and those who just want to make a fast buck.”

Royal Mail has been faring relatively well in recent years, although the latest results saw a 73% fall in profits and a continued reduction in mail volumes. Richard Hooper, who advised the Government to privatise Royal Mail after leading a review in the postal service, predicted mail volumes would fall 40% in the next five years. But he believes private investment is the best way of preserving the ‘universal service’. Mr Hooper said: “In order to maintain the universal service the finances of the Royal Mail need to be stabilised and made more robust. “The reason for this is the coming of e-mail, the coming of the internet and mobile phone texting has significantly eroded letter volumes.”

The problem is not unique to the Royal Mail – across Europe other companies are having to cut costs, modernise equipment and come to terms with a reduced demand for mail deliveries. Despite their tough talk, the unions have already agreed to work with the Royal Mail in cutting 8,000 jobs a year until 2013. Many experts say further cuts will be needed before the company is a viable proposition.

Rob Wotherspoon, who works for the Royal Mail in Bristol, is concerned privatisation will provide uncertainty for his colleagues and their customers. “Me and other postal workers feel that we provide an important service to the public, rural communities and small businesses,” he said. “We think it’s too risky to gamble with that by introducing a private company that’s only going to be interested in the bottom line.”

The Government has so far not said if it has a buyer in mind for the Royal Mail. Dutch company TNT was previously linked to investing in the company, but is now undergoing a restructuring and demerger. A private equity firm could be tempted and even a management buyout is a possibility. Whatever happens, the staff will be given a stake in the new private company, even if the future for many of them seems far from certain.

Extract from Sky News 9th June 2011



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