26 Jun 2020, 21:37
28 Jun 2020, 06:36
Janet Brum wrote:https://www.theguardian.com/business/nils-pratley-on-finance/2020/jun/25/ministers-should-check-their-post-royal-mail-problems-are-stacking-up
Vital restructuring is stalled, it’s at war with the CWU union and the business is losing £1m a day
It is only two years since Moya Greene departed as chief executive of the Royal Mail, accompanied by a near-£1m golden goodbye and claims that the organisation had been “transformed” since privatisation.
The share price in 2018 was close to an all-time high of 600p. Now it is 157.5p, down 12% on Thursday – not quite at an all-time low, but less than half 2013’s float price. Whatever has happened at Royal Mail over the past seven years, it wasn’t transformation as the rest of the world understands the term.
The restructuring process seems to have stalled before Greene left. Her successor, Rico Back, whose personal bonanza was even larger thanks to his time running the international GLS subsidiary, only jammed the gears further. He left an almighty, and unresolved, quarrel with the CWU union over technology and working practices.
The result is that Royal Mail’s finances were severely exposed to Covid-19 pressures in the form of a slump in letter volumes and a spike in parcels – an acceleration of established trends, in other words. You might assume the two factors would balance, but they don’t: letters are more valuable to the Royal Mail, and the parcels side still inefficiently sorts 70% of items by hand.
New-ish chairman Keith Williams put it starkly: the UK business is currently making losses of around £1m a day. That’s a better guide to the financial mess than the headline 25% fall in group pre-tax profits last year to £180m, where the chunkiest contribution came from the successful GLS operation.
Royal Mail is now trying to perform several feats at once. It plans to cut 2,000 management jobs; it needs to build two new automation hubs for the parcels side, and is a year behind schedule already; it must simultaneously cut capital expenditure; and it must make peace with its unions, whose negotiating hand is probably strengthened by the fact staff kept the show on the road during Covid.
Williams, an industrial relations veteran from his British Airways days, is probably a useful person to preach a firmer “we need to change” message. It is, however, easy to imagine how life could become trickier yet. A Czech billionaire, Daniel Křetínský, has turned up with an 8% stake, and his motives are unknown. A breakup bid to seize GLS? That would be politically explosive.
So would any tweak to the universal service obligation (USO), via which Royal Mail must deliver to every address in the land six days a week at a uniform price. A regulatory review is under way. Would a four-days-a-week service ease pressures or push the letters business over a cliff? Hard to tell, but the USO is another unpredictable element since reform would have to go through parliament.
Ministers may have assumed they could tune out of the Royal Mail saga after privatisation. They should pay attention now. The postal service looks alarmingly unstable.
28 Jun 2020, 07:43
28 Jun 2020, 09:08
28 Jun 2020, 14:00