The UK government has ruled out selling its remaining 30 per cent stake in Royal Mail before nextyear’s general election, with business secretary Vince Cable, stating that the government would
retain the minority stake for “the foreseeable future”, according to UK media reports.The coalition had been actively considering selling the remaining shares but scrapped theidea as Royal Mail’s share price continued to decline. The shares, which floated at 330p when RoyalMail was privatised in October last year and quickly soared as high as 600p, have lost 26 per centof their value so far this year, closing on Thursday night at 420p, the Guardian reported.
“I think we should remain [significant shareholders in Royal Mail] for the time being,” Cabletold ITV News. “We’re certainly not going to do anything within the foreseeable future.”
Cable and the government have been widely criticised for selling off Royal Mail too cheaply.During its IPO last October, there was huge demand for the 60 per cent of the company available,while Royal Mail staff was given 10 per cent of the shares as part of the privatisation. The shareswere trading as high as 598p in March.
The Department for Business, Innovation and Skills and the Shareholder Executive – whichoversees state-owned assets – held talks over selling the remaining 30 per cent in March, butdecided against it, the Guardian reported. The UK’s main opposition party, Labour, has ruled outselling any further stakes in Royal Mail if it wins the 2015 election.
Cable this week also accused Royal Mail of “scaremongering” over claims it will not be ableto maintain a universal delivery service because of alleged cherry-picking by its competitors. Hiscomments came after Royal Mail stepped up warnings that its universal service obligation (USO)public duty to deliver mail anywhere in the country, six days a week, for the same price, was underthreat.
Billy Hayes, general secretary of the Communication Workers Union (CWU), welcomed the factthat Cable “recognises the importance of the government retaining its stake in Royal Mail andshould see that as a long-term responsibility”. But he insisted that the public wants to see theuniversal service protected.
“The government needs to maintain a strategic overview of the company for not just for theforeseeable future but for the long term,” Hayes commented.
Royal Mail told this week’s parliamentary Select Committee inquiry into postal services thatalmost nine in ten UK Royal Mail customers values a six-day-a-week delivery service, with nearlytwo-thirds of those aware of the industry regulator believing that it needs to take more action toprotect the Universal Service, citing the results of a survey it conducted last month.
The information formed part of the first evidence session of the Business, Innovation andSkills (BIS) Committee inquiry into Competition in the Postal Services sector and the UniversalService obligation, which featured evidence from Moya Greene, CEO of Royal Mail as well as fromNick Wells, CEO of Whistl (formerly TNT Post UK); Guy Buswell, CEO of UK Mail, Daniel Vines,Director of Sales and Customer Services at TNT UK, and Roy Perticucci, Vice President of EUOperations at Amazon.
It also featured evidence from postal union CWU, which called for regulator Ofcom tointroduce an immediate cap on competition to Royal Mail in the final-mile delivery of letters orfor competitors to pay into a “universal service fund”, in order to protect the USO.
Royal Mail restated some of the elements of its detailed submission in June to regulatorOfcom of its concern that “unfettered direct delivery competition, which means cherry pickingeasier-to-deliver routes, will undermine the economics of the Universal Service without bringingclear benefits to consumers and businesses”. It is asking the regulator to bring forward theplanned review of direct delivery it has already committed to commence in late 2015, and “put inplace measures to address the threat it poses to the financial sustainability of the UniversalService”.
However, Wells responded: “We pay Royal Mail a fair and reflective price to cover the ruralareas, which takes out any opportunity for cherry-picking.” Whistl, formerly known as TNT Post UK,has been making deliveries in urban areas including London and Manchester since 2012, but relies onRoyal Mail to deliver in rural areas, where costs are higher.
Green told MPs that the universal service cost £7.2bn a year to finance, so neededcross-subsidy from profitable urban deliveries. She said Royal Mail had already seen a “structural”decline of between 4 per cent and 6 per cent in the volume of letters it handles every year.
But Wells said that it was that structural decline – rather than unfair competition – thatwas hurting Royal Mail.
