Yahoo Finance Royal Mail devises new tactic as it takes on striking union
Royal Mail is preparing to take on its striking trade union by tearing up a "groundbreaking" agreement to protect jobs and conditions that was signed when the company was privatised nine years ago.
Executives and legal advisers have been collecting evidence to allow them to trigger the break clause in Royal Mail’s legally binding contract with the Communications Workers Union (CWU), senior sources told The Telegraph.
The “Agenda for Growth, Stability and Long-term Success”, restricts Royal Mail from practices including employing new workers on different terms to existing staff; outsourcing; franchising out any part of its business; making compulsory redundancies; and using temporary labour.
The company is making arrangements to serve notice on the union as it loses £1m per day. Royal Mail is grappling with a steeply declining letter market and a rapidly growing and evolving demand for parcel deliveries with which its network of local sorting offices and unreformed working practices are struggling to keep pace.
Royal Mail’s deal with the CWU was signed under the previous chief executive Moya Greene in December 2013, as the company sought stability following a bumpy stock market debut that October. It was announced as "groundbreaking... the first of its kind in the UK", and the means to "create a can-do culture".
But current management, led by executive chairman Keith Williams, increasingly views the contract as an unreasonable barrier to essential change.
The union has so far announced four 24-hour strikes over a fortnight, starting on Friday, after rejecting a pay offer of 5.5pc.
The pay proposal is contingent on staff accepting reforms to working practices that Royal Mail argues are essential to compete with more nimble parcel delivery operators. They include the ability to deliver later into the evening and on Sundays.
Royal Mail has some limited ability to impose change. For instance from autumn it will deliver parcels directly from a new “Super Hub warehouse” in Warrington, Cheshire, rather than via local sorting offices. The CWU is opposing changes that it believes undermine the role of Royal Mail’s 115,000 workers.
To pull out of its contract with the CWU, Royal Mail must demonstrate that it faces one or more of the exceptional circumstances detailed in its break clauses. They include events that have a “material adverse effect” on its business or prospects, such as nationwide industrial action. Royal Mail can also ditch the deal if it believes on reasonable grounds that the restrictions imposed by the agreement are making a part of its business financially unsustainable.
No final decision has been taken, sources said, but with losses mounting and few other weapons to deploy in a dispute that appears to have reached an impasse, Royal Mail is said to be ready to act. Sources said it expects that serving notice would prompt legal action from the CWU and is working with advisers from DAC Beachcroft on its potential response.
Mr Williams, who is also embroiled in industrial strife on the railways as independent chair of the Rail Review, has also warned the union that further decline and lack of reform in its UK business could force a spin-off of Royal Mail’s successful international parcel operation GLS.
Pulling out of the “Agenda for Growth, Stability and Long-term Success” could simplify such radical action, which would be intended to placate restless shareholders. They have suffered a 50pc drop in the value of the stock this year, taking it back under its float price.
A Royal Mail spokesman said: "While our competitors work seven days a week, delivering until 10pm to meet customer demand, the CWU want to work fewer hours, six days a week, starting earlier and finishing earlier.
"Their plans to transform Royal Mail come with a £1billion price tag, are predicated on a wholly unrealistic revival in letter writing, and prevent Royal Mail from growing, and remaining competitive, in a fast-moving industry.
"The CWU’s vision for Royal Mail would create a vicious spiral of falling volumes, higher prices, bigger losses, and fewer jobs.
"We cannot cling to outdated working practices, ignoring technological advancements and pretending that Covid has not significantly changed what the public wants from Royal Mail. The change we need is the change the public demand of us."
Dave Ward, general secretary of the CWU, accused Royal Mail of trying to "level down" the company.
He said: "We are not surprised by this and we will not be fazed by it either. We are up for this fight and we are confident the public will support us.
"Royal Mail wants to change the whole basis of what the company is about. The board's proposals will turn it into just another parcel courier – they are about abandoning the universal service obligation and making as much profit as possible.
"We think they are taking liberties, not just with our members but also the public, and that is why we are taking strike action."
