UK to sell majority stake in Royal Mail through IPO

Britain will sell a majority stake in state-owned Royal Mail through an IPO this financial yearand will give postal workers a 10% stake in the company for free but the CWU union is threatening a

Business Secretary Vince Cable told the British parliament today that the government would “retain flexibility” over the exact size of the stake to be sold, which would depend on “marketconditions, investor demand and ensuring value for money for taxpayers”. The IPO is expected tovalue the company, whose financial results have improved significantly over the last two years, atbetween £2-3 billion.

Cable did not state when the flotation was likely, although UK media have pointed to the autumnas the most likely timing. The government is entitled to sell up to 90% of Royal Mail shares underpostal legislation.

The Business Secretary said Royal Mail’s 150,000 employees would be entitled to free shares oncondition that they held them for three years. Staff will also get priority treatment in the retailoffer for smaller investors. The 13,000 staff of Royal Mail’s European parcels subsidiary GLS willnot be entitled to free shares.

Cable told MPs that the IPO marked the final stage of postal reform in the UK and emphasised itwould give Royal Mail access to external capital through the financial markets for modernisationand investment in areas such as parcel services. Privatisation would put Royal Mail’s future “on tolong-term sustainable basis” and give Royal Mail “the real commercial freedom it has needed for along time”, he said.

“Now the time has come for the government to step back from ownership and allow the managementto focus whole-heartedly on growing the business. It’s time for employees to hold a stake in thecompany and share in its success,” he declared. Cable also stressed that the government wouldprotect the universal service with its nationwide pricing and six days a week delivery service.

But the CWU communications union, boosted by a ballot showing most Royal Mail workers opposeprivatisation, called on the government to change its strategy and find new ways for the company toaccess capital or face strike action. CWU General Secretary Billy Hayes and Deputy GeneralSecretary Dave Ward called for a model that makes Royal Mail a ‘not-for-dividend’ organisation withprofits re-invested into services.

“Nobody outside of government and their potential investors wants their postal service sold. Thepublic consistently oppose the sale and recently 96% of workers voted against,” Hayes said. “We areoffering the government the opportunity to discuss how best to genuinely take Royal Mail forward.It’s time for vested interests and political opportunism to be set aside and to seize the chance tomake the mail service work for customers, the company and the workforce.”

Ward added: “Royal Mail workers have co-operated with modernisation and greatly contributed tothe success of the company. We agreed a shared vision with Royal Mail and privatisation was neverpart of that vision.”

The CWU last week rejected a three-year 8.6% pay deal for Royal Mail’s 150,000 workers,describing it as “misleading” and a “sweetener” for privatisation. The union claims thatprivatisation will lead to the universal service being undermined and more “cherry-picking” oflucrative delivery areas by private competitors.