Royal Mail’s losses are worsening and the union should start talks | Nils Pratley

CWU leaders need to reflect on realities of Royal Mail’s deepening financial hole with threat of parent group’s break-up

Fat cat bosses holding workers to ransom? Yes, you can understand why the Communication Workers Union is screaming blue murder. Royal Mail’s threat of 10,000 job losses is one way to harden minds during an industrial dispute over pay and working practices.

But the CWU’s leaders would be wise to reflect on a few financial realities. First, Royal Mail is definitely in a deep and deepening financial hole. It has been bizarre in recent weeks to hear Dave Ward, the general secretary of the union, question Royal Mail’s claim to be losing £1m a day. Quoted companies do not pluck numbers out of thin air in their stock market statements, or not usually. In fact, Friday’s statement showed the position to be even worse: the six-month loss was £219m.

That figure, plus a projected loss of £350m for the full year, may feel unreal because Royal Mail made operating profits of £416m within a group-wide outcome of £758m last year. But the massive downwards swing only underlines the size of the boost from lockdown and Covid last time. The underlying trend is still a fall in letter volumes, intense competition in parcels and a need to become more efficient on that parcel side in normal trading conditions.

Second, a major round of redundancies is not the most dramatic manoeuvre at the board’s disposal. A break-up of the parent group, called International Distribution Services since 10 days ago, would be. Royal Mail would be separated from GLS, the non-UK parcels business run out of Amsterdam and the bit that currently makes all the money. There is still a question of whether UK politicians would permit a break-up but, since it would be GLS that would be leaving, it’s not obvious that new national security powers could prevent it. Under a split, Royal Mail’s stability would look even shakier.

Third, the shareholders, including Czech billionaire Daniel Křetínský with a 22% stake, are not sentimental about Royal Mail and its 500 years of history. With the share price at 190p, down another 9% on Friday, they would probably applaud a break-up. At the moment, the £4bn-ish worth of GLS (on course for profits of €370m-€410m this year), is obscured by Royal Mail’s implied negative value. It is only economically rational for those same investors to insist on a “no cross-subsidy” rule until there is a prospect of Royal Mail making profits again.

None of which is to deny that the company’s pay offer in April of a basic 2%, plus a conditional 3.5%, was miserable when inflation is 10% and the group had paid a £400m special dividend to shareholders last year. Whether it was also intended to trigger a confrontation with the CWU doesn’t really matter at this stage. The practical question is how to get out of the mess.

Royal Mail workers can make up their own minds, but the advice here would be to get round to Acas, the conciliation service, and talk. If this dispute runs through Christmas, the numbers start to get extremely ugly.


Nils Pratley

The GuardianTramp

Related Content

Article image
Royal Mail to cut up to 10,000 roles, blaming strikes and lower parcel volumes
Postal service expects operating loss of about £350m in year to end of March, which could rise to £450m

Mark Sweney

14, Oct, 2022 @6:52 AM

Article image
Royal Mail may face more strikes as talks with union end without deal
CWU says ‘unacceptable pressures’ placed on postal workers, as bosses say offer to union was increased

Jasper Jolly

05, Apr, 2023 @11:35 AM

Article image
Royal Mail requests permission to stop Saturday letter delivery
Firm reports £219m half-year losses and asks government to let it move to weekday-only service to cut costs

Mark Sweney

17, Nov, 2022 @2:11 PM

Article image
Royal Mail accused of ‘Uberisation’ as dispute with CWU escalates
Company proposes Acas meeting as it threatens to tear up elements of nine-year deal with union

Julia Kollewe

22, Sep, 2022 @3:51 PM

Article image
Royal Mail's attempt to block strike won't sort this bitter dispute | Nils Pratley
Row over pensions, pay and jobs will only intensify after employer’s attempt to get injunction to halt 48-hour walkout

Nils Pratley

09, Oct, 2017 @11:01 PM

Postal workers' union vows to step up resistance to Royal Mail privatisation
Process will be a 'ripoff' for consumers – as shown by 30% rise in price of stamps – CWU leader Billy Hayes tells members

Dan Milmo

22, Apr, 2012 @5:59 PM

Article image
Royal Mail agrees upon pay deal with postal workers’ union
Agreement includes a 10% salary increase and a one-off lump sum of £500 for all CWU-grade employees

Julia Kollewe and Alex Lawson

21, Apr, 2023 @2:27 PM

Article image
Glazer’s supposedly reckless financial Man Utd gamble has proved a triumph
Malcolm Glazer’s purchase of the team was an enormous risk. As his sons prepare their exit, they appear on the precipice of victory

Nils Pratley

23, Nov, 2022 @7:00 PM

Article image
Post Office strikes to overlap with Royal Mail and BT industrial action
CWU’s Andy Furey says issues at stake ‘are all remarkably similar’ across separate trade disputes

Joe Middleton

12, Aug, 2022 @3:48 PM

Article image
Royal Mail pay offer is ‘declaration of war on posties’, says union
CWU says firm’s offer of below-inflation pay rise and changes to work practices are unacceptable

Joanna Partridge

31, Oct, 2022 @4:17 PM