Royal Mail buyer Daniel Kretinsky vows to keep 6-day letter service

[Basildon Bond]

Daniel Kretinsky says he will not walk away from the Universal Service Obligation to deliver letters.

By Simon Jack & Tom Espiner | Jul 15, 2024 11:02 PM | 5 min. read

https://www.bbc.co.uk/news/articles/c4ngjx9nn92o

The prospective new owner of Royal Mail has said he will not walk away from the requirement to deliver letters throughout the UK six days a week, as long as he is running the service.

"As long as I'm alive, I completely exclude this," Czech billionaire Daniel Kretinsky told the BBC.

Mr Kretinsky has had a £3.6bn offer for Royal Mail accepted by its board.

Shareholders are expected to approve the deal on 25 September, but the government also has a say over whether it goes ahead.

Currently the Universal Service Obligation (USO) requires Royal Mail to deliver letters six days a week throughout the country for the same price. But questions have been raised over whether the service could be reduced in the future.

In an exclusive interview with the BBC, Mr Kretinsky also said he would be willing to share profits with employees, if given the go-ahead to buy the group.

However, he appeared to reject the idea of employees having a stake in Royal Mail, which unions have called for in exchange for their support.

The Royal Mail board agreed a £3.6bn takeover offer from Mr Kretinsky in May for the 500-year-old organisation, which employs more than 150,000 people. Including assumed debts, the offer is worth £5bn.

But because Royal Mail is a nationally important company, the government has the power to scrutinise and potentially block the deal.

As well as keeping the new government on side, Mr Kretinsky also faces the task of convincing postal unions that the proposed deal will benefit employees.

The USO is a potential sticking point for both the government and unions.

Royal Mail is required by law to deliver letters six days a week and parcels five days a week to every address in the UK for a fixed price.

How well this has actually been working in practice is a different matter. Ten years ago, 92% of first class post arrived on time. By the end of last year it was down to 74%, according to the regulator Ofcom.

Last year the regulator fined Royal Mail £5.6m for failing to meet its delivery targets.

Royal Mail has been pushing for this obligation to be watered down. It wants to cut second class letter deliveries to every other weekday, saying this will save £300m, and lead to "fewer than 1,000" voluntary redundancies.

'Unconditional commitment'

Mr Kretinsky has committed in writing to honouring the USO, but only for five years.

And after that, in theory, the new owners could just walk away from it.

However, Mr Kretinsky told the BBC: "As long as I'm alive, I completely exclude this, and I'm sure that anybody that would be my successor would absolutely understand this.

"I say this as an absolutely clear, unconditional commitment: Royal Mail is going to be the provider of Universal Service Obligation in the UK, I would say forever, as long as the service is going to be needed, and as long as we are going to be around."

Mr Kretinsky added that the written five-year commitment was "the longest commitment that has ever been offered in a situation like this".

Woman's hand posting a letter into a red post box

Another potential stumbling block for the deal, however, is how the company will be structured.

Unions would like to see the company renationalised, but Dave Ward, general secretary of the Communication Workers Union (CWU), told the BBC that would be "difficult in the current political and economic environment".

Instead, what the CWU is pushing for is "a different model of ownership" - that is, where the employees part-own the business.

To get its support for the takeover, the union wants employees to share ownership of the company, along with other concessions including board representation for workers.

It says profit sharing is "not going to be enough to deliver our support and the support of the workforce".

More strikes possible

If the union doesn't get what it wants, it won't rule out industrial action, Mr Ward said. Its members went on strike in 2022 and 2023.

Although Mr Kretinsky said he is "very open" to profit sharing, he is not in favour of shared ownership.

"I don't think the ownership stake is the right model," he said. "The logic is: share of profit, yes, [but an] ownership structure creates a lot of complexity.

"For instance, what happens if the employee leaves? He has shares, he is leaving, he is not working for the company, he [still] needs remunerating."

Mr Kretinsky said he didn't want to create "some anonymous structure" but instead "remunerate the people who are working for the company, and creating value for the company".

The union is also concerned about job losses and changes to the terms and conditions of postal workers' contracts.

Mr Kretinsky has guaranteed no compulsory redundancies or changes in terms and conditions but only until 2025.

"If we are more successful, and we have more parcels to be delivered, we need not less people, but we need more people," he said. "So really, job cuts are not part of our plan at all."

He said if the management, union and employees work together, "we will be successful".

Another concern is the potential break-up of the business.

The profit for Royal Mail's parent company last year was entirely generated by its German and Canadian logistics and parcels business, GLS. Royal Mail itself made a loss.

Mr Kretinsky has promised not to split off GLS or load the parent company with excessive debt, although borrowings will rise if the deal goes through.

But he has a way to go to convince the CWU.

"I can't think of any other country in the world that would just just hand over its entire postal service to an overseas equity investor," Mr Ward of the CWU said.

However, Mr Kretinsky said that the postal unions "do understand that we are on the same ship, and that we need this ship to be successful, and that if we are there, we don't have any real problems to deal with, because the sky is blue, and it's blue for everybody."

The union cannot stop this deal but the government can block it under the National Security and Investment Act.

Business Secretary Jonathan Reynolds has said he will scrutinise the assurances and guarantees given and called on Mr Kretinsky to work constructively with the unions.

Mr Kretinsky may say that he and the unions are ultimately on the same ship but, as things stand, they are not on the same page.

Who is Daniel Kretinsky?

Daniel Kretinsky started his career as a lawyer in his hometown of Brno, before moving to Prague.

He then made serious money in Central and Eastern European energy interests.

This includes Eustream, which transports Russian gas via pipelines that run through Ukraine, the Czech Republic and Slovakia.

He then diversified into other investments, including an almost 10% stake in UK supermarket chain Sainsbury's and a 27% share in Premier League club West Ham United.

The Czech businessman is worth about £6bn, according to reports.

[Basildon Bond]

Is it me, or does that line: "Mr Kretinsky has committed in writing to honouring the USO, but only for five years." sound like he's going to be a very bad owner?

Leaving to the side for now that many offices are not clearing at the moment so the USO isn't being honoured. It's one thing to continue to try and work under the USO but try to argue to change it and water it down and then try to keep to that (and probably look to water it down again until it diluted to nothing). However, it seems like it's another level to put a time cap on what you'll honour. What happens after five years? Free rein to do whatever the heck you like? Whatever saves/makes the most money? What's going to change in five years? If he's not going to honour it in five years, why not not honour in after 12 months?

In other words, after five years the USO will be whatever DK says it is - based on volumes of mail and parcels. How can DK put a time cap on the USO? Surely language like that should have the government looking to block the sale. It's one thing to keep the USO forever and try to thin it out legally. It seems completely wrong to allow five short years and then all bets are off.

[derekm]

The other thing is whatever he’s paying for the company it’s money borrowed and has to be paid back. So he will do whatever needs to be done to do that and most obvious is job cuts watering down the uso & pension Contributions

[norris9]

I can understand why he says this - things need to be reviewed at some point. 5 years is a long time IMO.

OFCOM: 'The universal postal service risks becoming unsustainable as people send fewer letters and receive more parcels, meaning reform is necessary to secure its long-term future, according to evidence set out by Ofcom today'.

At the end of the day - if letters drop off a lot within 5 years and parcels are expected to go up - it may well even itself out. A postie might be delivering letters to 200 houses a day out of 520 on their round, but be delivering 150 parcels. So things might just balance themselves out.

My own personal experience with letters are - they aren't dropping, people love mail, they get ridiculous amounts of it and I do not know why. There are so many houses on my round that get 3 to 7 letters a day. What information are people needing in such amounts on a daily basis?...

All I get is a bill now and again - that's it. My bank statements are digital, I get no junk mail and our payslips are now digital.

[BenacreNick]

Norris, "junk mail" is not a term any longer - as its all been paid for by someone.

The Union is asking for staff to have a share in the business, but we already have our shares (which will probably be sold early next year).

Mr Kretinsky seems to be doing everything that is asked of him ( ie providing commitments in writing), and yet people still don't believe him.

Let's see what happens further down the line.

[Rumple]

DK gets to buy RM on borrowed money that is then put onto RMs books. The loan is paid off with RM profits that the workers will need to generate. When it’s paid off DK is laughing, sitting on multi-generational wealth. Meanwhile, we don’t know how our working lives will play out.
The system is tilted the wrong way.

[DX]

Him saying he won't abandon the universal service as long as it is needed doesn't mean anything. Letters are already in decline and their is already a strong case to push it to 5 days, and it looks like offcom and unions support this. The price is going to go up twice every year by the maximum for the next 5 years which will accelerate the the decline. They expect it to to drop from 7 billion to 4 billion letters by 2027, but most likely it will be between 2 and 3 billion with the price rises so their won't be a need for a 6 day service and he knows it. At 2 billion letters I think it will drop down to a 3 - 4 day service.

[worktotime]

how can ward tell him to protect out t&cs when he has given up some of ours back to the company , and as for strike action he wouldnt even get the 50% return to go on strike so good luck with that one .

[bowie]

Not to be trusted

[BenacreNick]

I wouldn't trust Ward either, Bowie.

[enskied]

In the statement above he doesn't say that he is going to adhere to the USO, he says a six day letter service.

We are delivering letters six days a week now, just not all or even most of them and definitely not honouring the USO.

[Mr Rush]

Mr Kretinsky has committed in writing to honouring the USO, but only for five years.
And after that, in theory, the new owners could just walk away from it.

If the law cannot compel the company to fulfill its legal obligations, what good is a pinky promise? Just how far do you think any of us peons would get announcing we're only going to follow the law for the next five years?

[Hyrrokkin]

Cannot trust a word the man says - it is all PR to get over the line.

This man will slash thousands of jobs.
This man will further erode t&c even more than the current board & cwu have done.
This man will dilute the pension and end the new pension scheme.

The only question is how long will he waits until it happens.

[scotchy1962]

Hmmm doesn't sound promising, but on the other hand if he signs a guarantee that for 5 yrs he will do nothing stupid i will be retired and won't give a feck.
Bit selfish but always find a up side, from what i read it could be just more of the same s**t with a different owner. If he decided to cover the USO 6 days a week he would have to employ 20-30 thousand to replace the ones who were here and left, plus reintroduce the old duties. Don't see it happening.