Tuesday 25th Oct 2016 - Logistics Manager

An idea whose time has come?

I’m old enough to remember the creation of Parcelforce – the idea was to rebrand Royal Mail Parcels in preparation for privatisation in the early 1990s. 

But like all the other plans to privatise the business, it came to nothing. And there is no doubt that Royal Mail has suffered as a result of government vacillation. Compare the British government’s treatment of Royal Mail with the German government’s approach to Deutsche Post.

By investing and developing the business, Deutsche Post has become a major player in the global logistics market through its ownership of DHL. Rising profits from DHL have offset the decline in the traditional letters market in Germany.

In contrast, Royal Mail was for many years starved on investment, and has gone through a painful restructuring process.

This time it looks like the government might be prepared to see the privatisation through. The plan is to list Royal Mail on the London Stock Exchange this financial year.  Business secretary Vince Cable said the intention is to relinquish overall control and move to minority ownership of Royal Mail.

It will offer a ten per cent stake in the business to around 150,000 Royal Mail employees in the UK. The government has not yet decided how big a stake it will retain.

Cable made it clear that the key objective was to protect the universal service. But, the focus of Royal Mail’s business is changing. Letter writing has been replaced by email or social networking, bills are paid online, banks prefer to deliver account statements online. Last year, the number of addressed letters declined to 13.9 billion from 15.1 billion the year before.

While the traditional letters business is declining, growth is coming in the parcels market with the growth of online retail. Last year it handled 994 million parcels in its core network compared with 950 million in the previous year, while Parcelforce handled 70 million parcels, up from 66 million the year before. Royal Mail has been re-orientating its business to focus on this.

Government wavering over Royal Mail has not only denied the business the stability it needs, it has also been a cause of uncertainty in the wider market. Let’s hope that this privatisation will create the conditions for further growth in the parcels market.

Malory Davies FCILT,