The British government today delivered on its promise to privatise Royal Mail by confirming anIPO “within weeks” despite loud political opposition and union strike threats.
The sale of a majority stake, including 10% worth of free shares for employees, could raise upto £3 billion and will be the largest privatisation in Britain since the country’s railways in the1990s.
But the Communications Workers Union (CWU), which represents the bulk of Royal Mail workers,denounced the plan as “a betrayal of the British public”, claiming that 70% of the populationopposes postal privatisation, and warned that a pay-related strike could “put off” investors.
The Conservative-Liberal Democrat coalition government announced that it would sell amajority stake through an initial public offering in the coming weeks, although it left the sizeand value of the stake and the precise timing open. “HM Government will retain flexibility aroundthe size of the stake to be sold, as this will be influenced by market conditions at the time ofthe transaction, investor demand and the objective to ensure that value for money for the taxpayeris achieved,” it stated.
UK media reported that the IPO could value the company, which traces its history back to aservice founded by King Henry VIII in 1516, at between £2-3 billion.
Business Secretary Vince Cable declared: “We are completing the third and final part of thereforms agreed by Parliament two years ago. This delivers on the commitment in the coalitionagreement to give Royal Mail access to private capital.”
Business Secretary Michael Fallon, who is leading the sale, said the government aimed to sell amajority stake and emphasised there was sufficient investor demand for the sale. He played down thethreat of strikes and stressed there would be no changes to Royal Mail’s six-day-a-week deliveryservice.
Under the IPO plan, 10% of Royal Mail shares will be given free to UK-based company employees,numbering 150,000 in total, while the remaining shares will be sold to institutional investors andBritish consumers. Buyers must spend at least £750 per order.
Royal Mail shares will thereafter be listed on the London Stock Exchange. Royal Mail no longerincludes the Post Office network which was split off into a separate company last year and whichwill remain a fully state-owned organisation.
The IPO announcement has now set up a direct clash with British trade unions who voted at theirannual congress this week to oppose postal privatisation. A pay-related strike is alreadylooming in mid-October. The CWU plans to hold a strike ballot between September 20 and October 3after rejecting Royal Mail’s three-year pay offer and has warned it could take strike action fromOctober 10 onwards, disrupting not only the peak season business but also IPO plans.
Commenting on the IPO announcement, CWU General Secretary Billy Hayes said: “We remain convincedthat privatisation is the wrong decision for Royal Mail. It would be bad for customers, bad forstaff and bad for the industry. Privatisation would put jobs and services at risk and lead tohigher prices for customers.” The CWU wants the opposition Labour Party to commit itself tore-nationalising Royal Mail if it formed the next government.
Dave Ward, CWU deputy general secretary, added: “Today’s announcement gives us little newinformation. Everyone knew the government’s intention to float Royal Mail this financial year butwe’re surprised they’ve chosen to start this process at the very time we are balloting our membersfor strike action. This could put investors off.”
He underlined: “We’re pressing ahead with our ballot of 125,000 postal workers and we willcontinue to fight privatisation and the potential impact of a sale on jobs, terms and conditions.CWU is here for the long-haul. Any owner will have to deal with issues in the industry and take theworkforce with them. Investors should take note of public opinion too – 70% of the public areagainst privatisation according to the latest poll this weekend.”
For its part, Royal Mail, which has already welcomed the IPO plans, said it expected workers tovote to strike over the pay dispute but stressed that it had contingency plans in place.
