Yahoo Finance Royal Mail threatens to split up business as it reports £1m a day loss
Royal Mail has reported it is losing £1m a day and has threatened to split if it cannot achieve “significant operational change”, as it faces what could be the biggest strike of the summer.
The day after thousands of its staff in the Communications Workers Union voted in favour of industrial action, the company said it was considering “all options”, including separating its domestic and international businesses under a rebranded holding company called International Distributions Services.
The CWU hit back, calling Royal Mail “pathetic” and accusing it of “pleading poverty and threatening fragmentation” to try to get its way in pay negotiations.
Royal Mail said its adjusted operating loss between April and June was £92m and revenue was down 11.5%. It blamed plunging deliveries of Covid-19 test kits and items bought online, a long-term decline in letter deliveries and a “disappointing performance” in making the business more efficient.
The company said it had worked to reduce its variable labour costs by cutting back on overtime and the use of temporary workers, but had not been able to cut costs quickly enough to match the lower volumes of parcels and letters.
On Tuesday, the CWU announced the results of its ballot of postal worker members in a dispute over pay. Almost 97% voted in favour of strike action, on a 77% turnout.
The CWU and Royal Mail have both said they are prepared to return to the negotiating table, but the union said that if a deal could not be reached it would notify the company of the strikes, which are expected to take place in August.
Striking a downbeat tone in a call with reporters on Wednesday morning, Royal Mail’s chief executive, Simon Thompson, said it needed to “transform the way we work”, amid growing demand for larger parcels and next-day deliveries, including on Sundays.
He said productivity had “gone backwards” over the past three months, and that initiatives previously agreed with the CWU had stalled, amid worsening labour relations.
Royal Mail’s international parcels business, GLS, proved a bright spot as it reported an operating profit of £94m and higher revenue, despite a fall in parcel volumes. This was thanks to higher prices and increased freight revenues.
The company said it wanted to make the most of its new infrastructure, including a “super hub” for parcels in Warrington that opened in June.
However, Royal Mail said it needed to ensure it had a “more agile and sustainable relationship with the CWU”.
“I am more happy to meet to talk change and pay,” Thompson told reporters. “We need to discuss the change that will actually pay for the pay. It is the change we need to actually win and compete in the market and I am absolutely ready, we are absolutely ready, to have that discussion as long as it’s about change and pay.”
CWU spokesperson said: “It is pathetic that Royal Mail, a company which announced profits of £758m mere weeks ago, is now pleading poverty and threatening fragmentation unless they get their way.
“Our members are committed to growing Royal Mail as a high quality public service - they deserve a decent pay rise.”
The CWU’s deputy general secretary, Terry Pullinger, said Royal Mail’s purported 5.5% pay offer actually amounted to a 2% increase at a time of soaring inflation, which last month reached a new 40-year high of 9.4%.
Accusing the company of “sharp practice” and “not honourable behaviour”, Pullinger said he did not believe Royal Mail was putting forward a genuine offer. “They’ve been massively economical with the truth,” he told BBC Radio 4’s Today programme. “There is not [an offer of] 5.5% on the table as a straight pay deal with no strings for our members.”
Pullinger added: “They put the price of a stamp up 11%, but they’ve offered a 2% pay rise to their workers. The extra money they make on that doesn’t come back into the industry, it won’t go back to the workers. It will go straight out the window into shareholders’ pockets.”
Royal Mail has said it hoped to break even in the current financial year, but this did not include the impact from possible strike action.
