what we might be up against....
https://www.telegraph.co.uk/business/20 ... itish-led/
Royal Mail should be sold to a British owner who can build new businesses
The Sunday Telegraph
28 Aug 2022
Matthew Lynn
It could be the secretive billionaire known as the Czech sphinx. It could be Amazon. Or perhaps it could even be one of the private equity firms, looking at ways of loading it up with debt, splitting out profitable units and milking a soft-touch government for subsidies to keep services open for small villages. As the Royal Mail deals with a wave of strikes, and struggles with mounting losses, it is already becoming clear that potential bidders are circling.
Surely the institution that practically invented modern instant communications in the early 19th century deserves a better fate than to be picked apart by a collection of corporate vultures? In reality, this could be a great business again. It needs to be given the freedom to take on and defeat the trade unions; it has to be allowed to drop daily deliveries where they don’t make any economic sense; and it needs to move into new services. If it could do all of that the Royal Mail could thrive again – but it needs to be a British-led turnaround that rescues it.
Anyone looking forward to an unbeatable deal on a new credit card, or perhaps one of those slightly anxiety-provoking brown envelopes that HMRC specialises in, will have been disappointed this week. Around 115,000 postal workers started the first in a series of strikes bringing deliveries close to a complete stop. With the management and workforce at loggerheads over pay, it is unlikely that dispute will end any time soon. That will make a bad situation at Royal Mail even worse. The business lost £92m in the first quarter of this year, with revenues falling by 11pc, as the Covid boom in deliveries ran out of steam. Its share price has been hammered, falling by 42pc over the past year. Investors have, perhaps not very surprisingly, decided it has little genuine future.
A takeover bid is now a real possibility. It emerged this week that the Kwasi Kwarteng, the Business Secretary, has ordered a national security investigation into plans by the billionaire Daniel Kretinsky, known in the markets as the “Czech sphinx”, to raise his stake from 22pc to 25pc. If he is interested, then others may sense the possibility of a takeover as well. Such as? Amazon would be an obvious contender, since it makes virtually daily deliveries to most streets in the country already. And so would some of the private equity firms, especially if they could carve out its profitable parcels unit, and then claim inflated subsidies from the Government to keep rural services alive.
At this point, with the unions to grapple with, and the share price still falling, it is unlikely the management would put up much resistance. They might well be relieved to get rid of it, and collect a bonus on the way out. One way or another, Royal Mail looks to be in play.
And yet, there is a stronger argument for blocking a bid than “security”. In reality, the company desperately needs a turnaround. But it should be a British-led reboot of what could still be a great company, and not just foreign-led asset-stripping that destroys what little of the service is left. What should that look like?
First, we need to rip up the rules that were put in place when it was privatised that protect the unions. The Royal Mail is ridiculously overmanned and riddled with restrictive practices. Of course, we all sympathise with the posties who want a pay rise that matches inflation, and the unions are right to ask for that. But it should be accompanied by reforms that allow the company to operate more efficiently and with fewer staff. After all, with record numbers of vacancies it is not as if people can’t get jobs elsewhere right now. If that happened, the staff that remain could be paid better, and the company would be a lot more profitable as well.
Next, it should scrap daily deliveries where it wants to. No one has the right to get letters every day, and in many areas it is too expensive a service to offer. Sure, there will be lots of confected outrage about that, just as when the last remaining bank branch in the local village closes its doors. But no company can operate effectively when it is offering what amounts to a social service as well as a commercial business. If it doesn’t make money, and never will, then axe it.
Finally, allow it to expand into new businesses. There is no reason why the Royal Mail shouldn’t be delivering food, or just-in-time groceries, or partnering with the bewildering array of apps that were launched during lockdown to bring just about every service imaginable into the home.
In reality, communications and logistics should be a great industry in the 21st century. Lots of companies have done extremely well from it. After all, if Amazon isn’t basically a postal business with a warehouse attached it is hard to know what it is really. Likewise, Uber and Deliveroo are both fundamentally in the business of getting people and stuff from place to place as quickly and efficiently as possible. If they can make a success of it then so can the Royal Mail. But the company needs radical reinvention. That isn’t going to happen if a foreign bidder is allowed to take control, or if a cynical private equity firm is allowed to strip its assets. Nor is it very likely to happen with the well-meaning but ineffective chief executive Simon Thompson still in charge. In reality, It should be opened up to takeover by a British owner – and preferably an entrepreneur with a proven record of building new businesses – and perhaps then it could genuinely flourish once again.
‘The Royal Mail should scrap daily deliveries where it wants to’
