First time, union leaders have agreed to accept the end of six-day letter delivery a week. This will allow Royal Mail to make historic postal service cuts.
Royal Mail has faced a number of obstacles in reducing the daily losses it incurs due to its delivery service. One of these was the Communication Workers Union, which represents over 110,000 postal employees and took industrial action to bring services to a halt.
It is now willing to support the reforms that are being proposed by the company, and admits that the current service “is no longer financially viable”.
Royal Mail wants to reform the Universal Service Obligation (USO), which is a set of legally-binding rules that mandates letters be delivered to all UK households six days a weeks. The company wants to reduce the number of days it delivers second-class mail and to slow down the delivery of bulk letters.
The CWU changed its mind just a few days after Czech billionaire Daniel Kretinsky announced a £3-billion takeover bid for Royal Mail. This move appears to have influenced CWU.
Martin Walsh, the union’s deputy general secretary, said at the national conference of the union in Bournemouth, last week, “The USO is no longer financially feasible as a 6-day option.”
The challenges we face today are significant. This is probably the most difficult time in the history of this union, whether it be the USO sale, change or takeover.
Sources in the union said that they would not agree with a complete end to a six-day letter service, because first-class mail will still be delivered every Saturday. First-class stamps are not subject to price caps, so steep price increases could be used to force second-class to become the norm. Their price is capped.
Royal Mail must now convince Ministers and Ofcom, the industry regulator , to accept the reduced service. Ofcom has not yet responded to Royal Mail’s proposal.
Kevin Hollinrake said that the USO is still in place and there are no recommendations from Ofcom to change it.
However, if Labour wins the next general elections, the unions’ support of the plans will likely lead to a more positive perspective.
Walsh took to YouTube last week to reiterate his concerns. “The USO is not sustainable in its present form.” He said that there must be a change, but it has to be the right change for members.
Ofcom will look at different delivery times, such as three or four days. We’ll decide if we support this once we have looked into it.
Kretinsky is the largest shareholder in Royal Mail with a 27.5% stake. He is an energy tycoon, whose estimated net worth is £7.3 billion. His empire includes stakes at Sainsbury’s, West Ham United and Sainsbury’s.
Royal Mail, the parent company of Royal Mail, rejected Daniel Kretinsky’s bid after it was rejected by other shareholders.
In the first week of this month, he sparked anger in fellow shareholders by launching an offer to buy out the 500-year old company for 320p per share. Some called it a predatory bid to purchase the company at a low price.
Last week, the board of International Distributions Services (IDS), Royal Mail’s parent company, rejected this proposal and sought feedback from other institutional investors. One investor told Keith Williams IDS shares, which currently cost 271p per share, could be worth 600p once profits from a recent peace agreement with the union are reflected in the next 12-18 months.
Royal Mail plans to keep the six-day service for those who pay for first class, but most letters would be delivered only three days per week. The company estimates that between 7,000 to 9,000 daily deliveries would be cut through the reforms. It hopes this will save £300million a year.
Importantly, the retention of the first-class option would mean that the reductions wouldn’t require a law change. Ofcom can only give the green light to the reductions, but it would need the tacit approval of the government.
CWU was opposed to the “killing” of a 6-day postal service.
Dave Ward, the union’s general secretariat, said that: “At this time, when postal services are more important than ever and we should invest in our national infrastructure we should look for ways to enhance and protect a six-day postal service universal, and not reasons to reduce it.”