Royal Mail is to be privatised by being floated on the stock market during the current financial year.
Around 150,000 Royal Mail employees in the UK will be eligible to get a 10 per cent stake in the company for free at the time of the Initial Public Offering, creating the largest employee share scheme of any major UK privatisation for almost 30 years.
Business secretary Vince Cable announced that under the government’s plan, ministers will retain flexibility around the size of stake to be sold via the IPO, depending on market conditions.
General Logistics Systems employees and those of joint venture companies and other subsidiaries are not included within the scheme.
Cable said: “The key objective of our reforms to the postal market is to protect the one price goes anywhere, six days a week service that businesses and communities throughout the country rely upon.
“To do that Royal Mail needs future access to private sector capital because the postal market is changing; the number of letters we send is declining, while the number of parcels is growing as online shopping becomes more popular. Royal Mail is competing with other postal operators, as well as the internet, smart phones and tablets.
“But Royal Mail in the public sector has its hands tied in a way its competitors here and in Europe do not. It cannot be right for Royal Mail to come cap in hand to Ministers each time it wants to invest and innovate. The public will always want government to invest in schools and hospitals ahead of Royal Mail.
“An IPO is an open and transparent way for us to sell shares in Royal Mail and will allow members of the public to buy shares if they wish.”
The sale follows the passage of the Postal Services Act 2011 which lifted restrictions on Royal Mail ownership allowing the government to sell shares in the company, set up a new regulatory regime with Ofcom as the new postal market regulator and enabled Royal Mail’s historic pension deficit to be transferred to government.
Royal Mail has been taking steps to improve its profitability as it prepares itself for privatisation. This has included increases to its prices with particular impact on certain size and weight bands.