Royal Mail said it may need to cut up to 10,000 roles by next August, blaming strike action by its workers and the continuing decline of its core business.
In an unscheduled trading update a day after Royal Mail workers staged a 24-hour strike over pay and conditions, its parent company International Distributions Services said thousands of roles would have to go at Royal Mail because of damage and disruption caused by industrial action, as well as declining parcel volumes.
Royal Mail said it expects to make an annual operating loss of about £350m in the year to the end of March 2023. It said that could rise to £450m if customers turn to rivals because of the disruptions to its delivery services.
The company said that it was looking at making redundant up to 6,000 full-time frontline jobs in delivery and processing by the end of August next year.
Overall, Royal Mail said it is seeking an overall reduction of 10,000 full-time equivalent (FTE) roles over the same period, and said more might have to go if new strike dates are announced. This includes cutting overtime, temporary staff roles and not filling roles when employees leave the business. In total, Royal Mail employs about 140,000 people.
“We will be starting the process of consulting on rightsizing the business in response to the impact of industrial action, delays in delivering agreed productivity improvements and lower parcel volumes,” the company said. “Wherever possible, we will look to achieve FTE rightsizing through reductions in overtime, temporary staff and natural attrition.”
It is the latest move in the bitter row between Royal Mail and the Communications Workers Union (CWU). The union accuses the company of planning structural changes, which would in effect transform employees in secure, well-paid jobs into a “casualised, financially precarious workforce overnight”. The company says it must modernise in order to run a more productive and competitive service.
Responding to the job cuts announcement, the CWU called for an urgent meeting with management and accused Royal Mail of holding postal workers to ransom and turning the company into a “gig economy-style parcel courier”.
“The CWU is calling for an urgent meeting with the board and will put forward an alternative business plan at that meeting,” said Dave Ward, the general secretary of the CWU. “This announcement is holding postal workers to ransom for taking legal industrial action against a business approach that is not in the interests of workers, customers or the future of Royal Mail. This is no way to build a company.”
Royal Mail said eight days of industrial action had taken place or been notified to the company by the CWU, with a further 16 days of potential strike action planned for November and December.
“If these take place, the loss for the full year would increase materially and may necessitate further operational restructuring and headcount reduction,” the company said. “We will also continue to push for talks with CWU at Acas, which need to be time bound as the damage from further strikes will only necessitate further changes in the business, beyond those already announced.”
Royal Mail, which said that it is unable to give a “clear outlook” for the full year because of the disruption to its business, added that the parlous state of its financial position means that it cannot afford to pay the historical redundancy package of up to two years’ pay to staff.
Shares in its parent company, IDS, plunged 10% on Friday, making it the biggest faller on the FTSE 250.
Royal Mail’s international parcels business, GLS, proved a bright spot and is on track to meet market expectations of making a profit of between €370m and €410m for the full year.
However, Royal Mail said the profits from that arm of its business should not be used to prop up its ailing UK operation.
“The board has always maintained that there should be no cross subsidy in the group and recognises the need to address improvements in Royal Mail’s performance quickly,” the company said. “In the event that significant change within Royal Mail is not achieved, all options remain open to protect the value and prospects of the group, including separation of the two companies.”