Privatisation: how it might happen and what it could mean

[TrueBlueTerrier]

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Royal Mail's privatisation: how it might happen and what it could mean for Royal Mail

Ed Davey, the postal affairs minister, has told The Daily Telegraph that floating Royal Mail on the London Stock Exchange is one option for the Coalition. Here, we look at how any flotation might work and what it means for the postal service.

By Christopher Hope, Whitehall Editor
Published: 7:30AM BST 10 Jun 2010


Ed Davey, the Postal Affairs minister, said floating Royal Mail was an option because its future was at stake.

How might a flotation work?

In the great privatisations of the 1980s and 1990s, the Government opened up the sale of state owned assets like British Gas and British Telecom to members of the public, who bought shares to trade on the London Stock Exchange. The issue for Mr Davey will be whether the shares are sold to repeat this and sell shares direct to retail investors, or whether to make them available through City institutions.

Ed Davey, the Postal Affairs minister, will be under major pressure to sell shares direct to the public, because of the likely enthusiasm among members of the public to buy shares in Royal Mail, given the organisation’s status as a “national treasure”.

Any such retail sell-off would involve a major publicity blitz alongside the lines of the famous “Tell Sid” advertising campaign, which intensified interest in the sale of British Gas.

However it will be very expensive to administer. The last privatisation of a state-owned Government business was under Labour when the specialised defence firm Qinetiq was floated in 2006, raising £1.3billion. In this instance ministers were initially criticised only for only making the shares available to City institutions. Following a campaign by The Daily Telegraph backed by thousands of readers, they agreed to offer a small portion of shares to direct to the public.

How quickly could this happen?

Mr Davey is desperate to get on with it, and has agreed to provide more details by the end of next month. He told The Daily Telegraph that his colleagues are “slightly surprised with the relish that I am approaching this”. He knows he is in for a battle with both the CWU postal union and left wing Labour MPs, which successfully saw off Lord Mandelson’s plans to part-privatise Royal Mail, set to oppose any plans.

What would happen to the money raised by any listing?

If the entire company is floated, it could raise £9billion, based on a valuation of Royal Mail from December 2008. This cash could be used either to plug Royal Mail’s £10billion pension fund deficit, to invest in further modernisation of the company. Mr Davey has not decided yet whether the privatised Royal Mail will keep control of its pension fund, or whether it will remain under the Government’s control.

Will this affect the universal post?

No, it should not. The universal post – a commitment to delivering a letter or parcel for the same price anywhere in the UK - was guaranteed in a review by Richard Hooper, published in December 2008. Mr Davey said the Coalition considered the Hooper review to be its “core reference document”, which suggests that any sell off of shares in Royal Mail should not affect the delivery of letters and parcels.

Will it mean more post offices will shut?

No, it shouldn't. Mr Davey has specifically ruled out including post offices in the privatisation plans. They will instead stay in state hands, and Mr Davey said he will work “night and day to make sure there is no repeat of Labour’s mass closure programme”. He stopped short of saying they will not be any further closures at all however.

[tincatinca]

This has been coming for years and now the tories are in it will happen and probably pretty soon.

My guess is it will mean full blown privatisation for the Royal Mail Group(except for the post offices network) and everyone who works in it.

The Whole of the business will probably go, the two exceptions might be;
a/ the pension scheme; this has already been lined up for privatisation. It would be logical to keep the old scheme under the government so the public purse will take on any shortfall which is, and will remain an unknown ammount untill all those in the scheme die. To put that risk on the privatisation will affect the sale pice to much and the government need the cash now. The new defined benefits scheme we are all now in should be self sustaining and could therefore be included in the privatistion.

b/property; this could be included in the privatisation or sold separatly and leased back, whichever would give the the most cash now. Either way it won't make any odds to us posties.

What will it mean for us posties?

These are my best guesses

We will be bribed with a bit of hush money in the form of free or cheap shares during privatisation.

After privatisation the level of service will be cut and jobs with it, do you really think we will be taking the likes of mailsort five days a week.

There will be a steady erosion of our pay and benefits to leave us not much over minimum wage.

The only silver lining may be the private company will not tolerate some of the tossers we have as managers.

Overall Royal Mail will become a much smaller, leaner and for those left a meaner company providing a lesser service than now.

Good luck to all boys and girls I could be completely wrong, but I doubt it.

[Flashman_]

IMHO If other privatisations are anything to go by, one the biggest impact will be on the mail users. postal prices will rocket to something more similar to courier prices and services will become more intermittent for isolated locations.
If they go down the line of the way the railways and buses were split up into different companies you may have to buy a different stamp depending on where an item is going, and post it in a different postbox.
Any privatised industry in the past has all turned out to be bad for the customers and the staff, they are run purely to make as much money as possible at the cost of customers and workers. They have all put prices up to boost their profits and give less service(especially the Utilities companies). They have and will cut corners axing jobs cutting services and occasionally endangering lives(several rail crashes were caused by cost cutting). They treat workers like any other commodity. They may even find that its just not worth keeping the service and run it into the ground as with the NCB.
Take for an example the way bus services are run. Where I live they have cut many routes recently and only keep the hugely profitable ones. This means that if you could afford to not use a car and pay their inflated fares you may find it very difficult to get around. Add in that you have to use the same company for return tickets and bus passes. Where in all this is the "Service" they only serve their shareholders and it would be the same for our Service.

[Judgee]

The only possible saving grace should RM be privatised would be the supplemented DSA. No more free rides for TNT and alike. The government could not force a private company to deal with competitors post for a loss, at least I think they would find it alot harder