Royal Mail deadlock threatens to wreck Christmas deliveries

The flurry of Royal Mail announcements Monday may have appeared coordinated to a more sceptical eye.

The announcement that ministers would allow the sale of the 500-year-old postal service rattled the cages, with bosses at the postal service in a row alongside striking workers.

Grant Shapps, the new Business Secretary, has stated that he will not intervene in the event that Daniel Kretinsky (the billionaire known as “Czech Sphinx” tries to increase the stake beyond 25pc, opening the doors to a full-blown takeover.

He announced his decision just hours after Royal Mail (now known as International Distribution Services, (IDS) offered a new pay deal to Communication Workers Union (CWU), in what appeared to be an olive branch.

However, the deal includes strings – and was immediately rejected by union chiefs.

After eight days of strikes during the autumn, the company announced that 10,000 job opportunities are now available.

It has warned staff that they will not accept a 9pc increase in pay and new terms including 24/7 parcel deliveries, closure of mail centres, and later finishes, if the business is to survive.

Simon Thompson, Royal Mail’s chief executive, stated that Royal Mail suffered a loss in the first half year of £219m. This again shows that Royal Mail needs to be transformed.

One union insider described the demand as an “all-out declaration war” and it sparked threats to roll industrial action up until Christmas. This situation would be a disaster for British households.

On Tuesday, union bosses will meet to discuss how to formalize their responses.

In a sign that their tempers were frayed, a spokesperson for the CWU stated: “These proposals are to dismantle a 500-year-old military service and destroy the lives of those who served it.”

Despite all the public ire, Monday’s double-whammy announcements have put new pressure on the CWU at the right moment for Royal Mail.

Chairman Keith Williams and Simon Thompson, UK boss of the company, have long advocated that radical changes are needed to modernise the enterprise, which is currently on track to record a loss of £350m this year.

They have already killed several sacred cows and even torn up key agreements with the CWU. Last month they claimed that these agreements had been “used to resist change”.

In July, they suggested that the UK business be spun off and sold if it is not rescued. They also stated that all options were open to them, including the possibility of separating domestic operations from those overseas. This would be done through an International Distributions Services holding company.

This would theoretically leave IDS only with the much more profitable international parcels business, GLS.

Another possibility that is now more likely after Monday’s Government decision could be Kretinsky, an energy tycoon.

He stated his intention to buy a 25pc stake or more this summer, which automatically triggers a national security investigation according to new laws. Grant Shapps (the new Business Secretary) stated Monday that there was no danger from the plans.

The postal network of Royal Mail is an essential national infrastructure. However, Shapps now says he is open to Kretinsky taking over the postal network.

Forbes estimates that the tycoon has a personal fortune in excess of $5bn.

He invested in fossil fuels at a time other people are focusing on green technologies. He bets that the transition from net zero will take more time than expected.

He has an empire, which has been built through his ownership of power plants and pipelines that transport natural gas from Russia to Europe. This has generated large amounts that he has reinvested abroad in traditional businesses that he believes are undervalued.

He is a major shareholder in West Ham United football team. He also owns stakes in the French newspaper Le Monde as well as Sainsbury’s, Macy’s and Macy’s.

A 100-room Chateau in Paris was also purchased by the billionaire for EUR43m (£37m). He plans to turn it into a hotel.

Vesa Equity Investment (his investment vehicle that currently owns 22pc IDS) welcomed Monday’s announcement by the Government.

The possibility of a Kretinsky deal has stirred the CWU –, which claimed Royal Mail’s changes were a prelude to cutting standards and selling business –, with the union afraid that the tycoon might make a harder negotiator.

One union insider said that you would be looking at a “classic private equity situation.” It would be a simple matter of removing all valuable assets, and then it would be a race to the bottom in terms of pay and conditions.

This might make Royal Mail’s offer of a pay increase a little more appealing to some, but it remains controversial.

The agreement offers workers a 9pc increase in their pay over the next two years. This figure includes a 2pc increase already granted in April, and a 3.5pc increase from the date a pact was signed. There will be another 1.5pc increment next year. A lump sum payment of 2pc would be made to workers.

However, the deal would require them to accept new terms and performance goals that many may find difficult to swallow.

According to the Telegraph, this means that staff will need to work longer hours to meet the increasing demand for next-day delivery, will be required to accept parcels on their own routes and will be subject to less generous sick pay.

It is also looking to close some mail-sorting centres as the volume of letters continues to fall. It will also examine the number of customer service kiosks within them.

New arrangements will see Royal Mail’s new recruits receive lower pay and benefits than CWU-affiliated workers, and they will work longer hours.

Thompson announced the package by saying: “We’ve always been clear that the more the business can be changed, the more we will have the ability to pay our employees – both now, and in the future.”

“We ask the CWU leadership not to delay in accepting the change and the pay offer, to call off any damaging strike action and to help us transform the business.

“This is the only way to ensure Royal Mail’s future, and job security for our employees.”

However, faced with Christmas strikes, Monday night’s chief executive’s offer was met with a cold reception.

One employee asked the question in an internal chat room. Another described the suggestion as a “joke”.

Royal Mail’s posties refuse to bend to pressure, even though the stakes are higher. Months of chaos are likely with a board that is seemingly supported to the brim by its largest shareholder.

Linking Shareholders and Executives :Share Talk

If anyone reads this article found it useful, helpful? Then please subscribe or follow SHARE TALK on our Twitter page for future updates. Terms of Website Use All information is provided on an as-is basis. Where we allow Bloggers to publish articles on our platform please note these are not our opinions or views and we have no affiliation with the companies mentioned

Weekly Newsletter

Sign up to receive exclusive stock market content in your inbox, once a week.

We don’t spam! Read our privacy policy for more info.