Exclusive: Royal Mail Chief To Urge Regulatory Reprieve

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Moya Greene, chief executive of Royal Mail, will tomorrow urge the creation of a level playing field for the company as it posts an annual loss of more than £100m in its traditional letters arm.

I have learned that Greene will warn that Royal Mail's future will be jeopardised if a new regulatory framework being drawn up by Postcomm, the industry regulator (for the time being), penalises her company by maintaining strict price controls on the majority of its operations.

Greene will make the remarks alongside the presentation of Royal Mail's full-year results, which, as I revealed at the weekend, will include a modest profit for the group but a sizeable loss for the letters division.

To be clear, the remarks likely to be made publicly by Greene tomorrow have been expressed by her in private several times in the year since she took the role. She believes that the 80 per cent of Royal Mail's business currently subject to price controls needs to be freed from existing regulatory shackles.

I can also reveal that a state aid application put together by the Government has now been submitted to Brussels. Royal Mail is desperate to avoid the enforced sale of GLS, its profitable European parcels subsidiary although the contents of the state aid submission are as yet unclear.

In a statement last week, the Department for Business, Innovation and Skills said:

"Work to establish a new regulatory framework for postal services is already underway. The Bill provides for the transfer of regulatory responsibility from Postcomm to Ofcom alongside significant reform of the existing regime, ensuring that regulation is proportionate to the needs of the market. Ofcom will launch a consultation in the autumn with a view to establishing the new regulatory framework in spring 2012."

And as I wrote at the weekend, it will be impossible for any potential outside investor to attribute a valuation to Royal Mail until the detail of this new regulatory framework is clear. So from the taxpayer's perspective, it will be desirable that Royal Mail will be free to compete as widely as possible (while still being obliged to fulfil its Universal Service Obligation).

I should have added that a speedy resolution to the regulatory overhaul is also essential if Royal Mail is to attract an investor while its business remains viable.

Royal Mail will also unveil its annual report tomorrow, which, given that there is also talk of a stock market flotation for the company, may offer a good opprtunity to demonstrate the levels of disclosure seen in equivalent public company documents.

Royal Mail declined to comment tonight.