Royal Mail privatisation gets another push

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Privatisation of Royal Mail has taken another step forward with the publication of an update to the  2008 Hooper report on the maintenance of the universal postal service in the UK.

In the update, Richard Hooper said the underlying issues that threatened the universal postal service remained and that urgent action had to be taken including introduction of private capital into Royal Mail in the form of a sale to a partner or an IPO.

Hooper found that:

* The decline in the number of letters being sent is greater than forecast in the 2008 report and will continue to deepen – worldwide falls in the next five years of between 25 per cent and 40 per cent are likely. The continued growth in parcels (a result of internet shopping) will not make up for the decline

* Royal Mail’s financial position has deteriorated and the pension deficit, of around £8bn as at end March 2010, is even more unsustainable than 18 months ago

* Despite important steps forward on modernisation, Royal Mail still lags well behind the leading postal operators

Recommendation include:

* Private sector capital must be introduced into Royal Mail in the form of sale to a partner/trade investor or an IPO.

* A new less burdensome regulatory framework is needed with responsibility for regulation moving from Postcom to Ofcom

* The pension deficit should be taken over by the Government as part of the wider range of measures

Business secretary Vince Cable said: “This update reaffirms the findings of Richard Hooper’s original report and the views he has given me during the course of the summer. He paints a very clear picture – Royal Mail is facing a combination of potentially lethal challenges – falling mail volumes, low investment, not enough efficiency and a dire pension position.

“We are determined to safeguard Royal Mail for the future and help it tackle these challenges. We will come forward with new legislation in the autumn. It will draw heavily on Hooper’s analysis and recommendations and the Government’s wider objectives, including the need for employees to have a real stake in the future of the business.”

Mark Lewis, chief executive officer  of Collect+ which offers an alternative service to Royal Mail, said: “Richard Hooper’s report is an attempt to preserve the universal service of the Royal Mail. Many who are forced to use Royal Mail would already argue that the service is far from universal. As it stands, it simply does not provide a solution that fits with the lives of busy consumers.

“The risk with privatisation is that it may make a bad service worse. Hooper’s 2008 report suggested cutting the number of sorting offices and delivery centres so consumers can look forward to even longer queues on a Saturday morning when they receive the dreaded ‘sorry we missed you’ card and those sending parcels can look forward to then increasing cost of missed delivery. In the short term, users of Royal Mail are going to have make provision for strikes which are now almost inevitable.”

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