Red-letter day for once revered institution

[TrueBlueTerrier]

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Privatising Royal Mail will be one of the stiffest tasks in the 500-year history of the world’s oldest postal service. In its Victorian heyday it was envied worldwide for speed and reliability and was vital to Britain’s industrial prowess.

During the past decade, Royal Mail has suffered management crises, evaporating profits and industrial strife. A fightback has been taking place, however, first under Allan Leighton and Adam Crozier, and now under Moya Greene, the chief executive hired from Canada Post.

Like other postal operators, Royal Mail is striving to modernise fast enough to keep pace with loss of letters traffic to electronic media.

After 20 years of failed attempts by Conservative and Labour governments to sell it off, the coalition has passed legislation to privatise the letters and parcels business, while hoping to mutualise the Post Office network.

The task now is to improve Royal Mail’s efficiency and profitability while hoping market conditions will be right to sell or float at least part of it by autumn 2013. Its modernisation programme will see tens of thousands more of its 163,000 jobs go during the coming years.

Royal Mail’s story began in Henry VIII’s day with the appointment of Brian Tuke as master of the posts in 1512. In 1635, under Charles I, the King’s Post was turned into a monopoly that lasted until Labour’s Postal Services Act of 2000, which paved the way for private competitors to take much of its lucrative corporate mail business.

Among its most illustrious figures was Sir Rowland Hill, who campaigned to introduce a cheap, uniform penny post in 1840. But by 2001, poor leadership saw Royal Mail’s profits turn to losses. Michael Heseltine, former Conservative trade secretary, had failed to privatise it in 1994 and Labour’s Lord Mandelson failed to win MPs’ support to sell a 30 per cent stake in 2009.

Now the legislation has passed, but the decline of letters makes a sell-off difficult. Some fear Britain may have missed the boat, after Germany and the Netherlands privatised their mail in better times almost 20 years ago.

“That is not a view we remotely share,” said a person close to the sale process. “There is plenty of juice in Royal Mail.”

In an official report three years ago, Richard Hooper, former deputy chairman of Ofcom, recommended three steps to secure the universal service of six-day-a-week deliveries to every address at a uniform price: a write-off of Royal Mail’s pension deficit, a new regulatory system and introduction of private capital.

Brussels last week approved the pension write-off and Ofcom, the communications regulator, is due to confirm plans for lighter-touch regulation in the next few days. Union opposition remains a potential obstacle, but so far no industrial action has been threatened.

Going where the Iron Lady feared to tread

Even Margaret Thatcher balked at privatising Royal Mail, saying she was “not prepared to have the Queen’s head privatised”. Now the coalition is venturing where the Iron Lady feared to tread.

Privatisation is seen by many as the defining idea of the Thatcher era. By the time she left office in 1990, more than 40 UK state-owned businesses employing 600,000 had been sold off.

Privatisation continued under subsequent governments. Labour sold more than £50bn of state assets. Now the coalition plans to auction part of the government’s 49 per cent holding in National Air Traffic Services.

Among the biggest deals are:

● British Petroleum 1979 After James Callaghan sold 17 per cent of BP in 1977 to appease the IMF, Margaret Thatcher sold the government’s holding between 1979 and 1987.

● British Aerospace 1981 Partial sale of the aerospace manufacturer ushered in an era of big privatisations.

The £4bn flotation of 51 per cent of BT proved hugely successful and marked a departure as a utility seen by many as a monopoly suited to public ownership. Later tranches fetched £10bn.

● British Gas 1986 Some 1.5m people, lured by a fast profit and the “Tell Sid” advertising campaign, took part in the record £5.6bn flotation.

● British Airways 1987 Flag carrier sold in a £900m flotation

● British Steel 1988 Its £2.5bn flotation marked a new phase of privatisation in areas such as coal and electricity once regarded as barren for the private sector.

● Water 1989 Privatisation of the 10 water companies of England and Wales, which raised £3.6bn.

● Electricity 1990 Privatisation into 12 regional electricity companies, two generating companies and the Natilonal Grid, criticised for not creating enough competition.

● British Rail 1993-1996 The most complex and controversial privatisation involved breaking BR up into more than 30 companies and selling them separately.

● BNFL 2006-2009 Company sold its Westinghouse subsidiary to Toshiba for $5.4bn and later sold the companies that made up its subsidiary, British Nuclear Group.

Now it remains to get Royal Mail into shape for a sale. In 2010-11, it made an overall operating profit of £39m on £9.2bn sales, but the letters business lost £120m. At this year’s interim stage, the loss on letters and parcels came down to £41m from £55m a year earlier and free cash flow was positive for the first time in three years. But the daily postbag fell 6 per cent to 59m items, the lowest for about 20 years.

Royal Mail estimates the number of letters posted will continue to fall at about 5 per cent a year, though some of that is offset by rising deliveries of packets ordered over the internet. The company is so hard to value that one analyst gave it a range of £700m-£5.7bn 18 months ago. That may start to clarify.

The government favours a stock market flotation, but if market conditions do not allow that, an initial sale of a stake to a private equity company followed by a flotation later looks the likeliest course.

That happened in the much-criticised privatisation of Qinetiq, the former defence research agency, but insiders insist there are “no meaningful parallels”. The main problem was that Qinetiq’s bosses and senior scientists made huge windfalls, unlikely to be repeated at Royal Mail.

CVC Capital Partners, with stakes in the Belgian and Danish postal services, has shown interest in the past. At this stage the Netherlands’ PostNL and Germany’s Deutsche Post do not look likely bidders.

[minx]

Hi Guys
does anyone on this site know how many of our posties will lose their jobs and which cust service centres will go . We keep having meetings one says we are in profit though letter vol has dropped the next meeting says we are all going to the gutter and people will los e their jobs , then when we ask about pay rises or bonus suddenly we get a cheesy smile and the reply was thats all being looked into and there is a positive motion , positive about coming up with another pack of couldn't careless lies more like. does management or government even care about us workers , the british postie is the best in the world , and no one can match us seviice wise , but then i suppose we have to be sold off , as
no doubt government need funds for their homes holidays and whatever other jollies they can con out of us . :dcfo :ncfo

[POSTMAN]

There will be cuts every year,but in your job what with the customer complaints going through the roof you should be safe......every cloud.

[Stormproof]

There will be cuts every year,but in your job what with the customer complaints going through the roof you should be safe......every cloud.

Have to disagree, likely to be farmed out to some call centre in India like all the other 'service' industries that have been sold off.

[minx]

Thanks guys maybe we should have a group hug,allwe can do is keep our heads down ignore the managers and hope we keep our jobs

[POSTMAN]

There will be cuts every year,but in your job what with the customer complaints going through the roof you should be safe......every cloud.

Have to disagree, likely to be farmed out to some call centre in India like all the other 'service' industries that have been sold off.

Good point.

[TrueBlueTerrier]

Thanks guys maybe we should have a group hug,allwe can do is keep our heads down ignore the managers and hope we keep our jobs

Been there as a phone drone, not Royal Mail - but its soul destroying - you have my respect and thanks.

Became a postie because of it, best move I made.