Can Unions Force A Royal Mail Bailout

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Professor Joseph Lampel, Professor of Strategy Cass Business School

Royal Mail must modernise its operations and focus on profitable niches if it is to survive in this increasingly competitive postal market.

This entails greater costs due to investment in the short-run, and layoffs in the medium to long-term.

The Communication Workers' Union is well aware of this, and is supportive as far as modernisation is concerned.

It is clearly opposed to layoffs, but even here it knows that this is unavoidable. What it hopes for is that most layoffs will be through natural attrition.

Hope, however, must contend with the harsh realities of delivering mail during a recession.

Striking seems nothing but counterproductive. The Royal Mail is in deep financial difficulties as it is.

So why is the union taking industrial action?

While tension between the two bodies is long-standing, the real target of the union's actions is the Government.

It has not escaped the notice of union leaders that the Government has come to the rescue of banks, rail companies, and car manufacturers.

These are all regarded as critical sectors that underpin the stability of the UK economy.

It is clear to me that the union is hoping that the Government will likewise regard mail services as too important to be left to market forces and step in with emergency funding which will relieve the pressure on Royal Mail.

Will this come about? Under normal circumstances this would be most unlikely.

However, in the current climate this may happen, but only if there is no explicit link between union action and Government funding.

There is no way that the Government would like be seen as giving in to union demands in this context.

Joseph Lampel, is Professor of Strategy at Cass Business School