The UK government has insisted that the threat of strike action will not derail the imminentprivatisation of Royal Mail, which was this week rated the financially strongest of any
international mail and parcels operator by independent research organisation Rapid Ratings.A Department for Business spokesperson told CEP-Research that it was “disappointing” that theleadership of the Communication Workers Union (CWU) had decided to ballot its members about whetherto strike, while negotiations were continuing between Royal Mail management and the CWU – and afterRoyal Mail had made an offer to the union that he believed met all employees’ concerns. But he didnot believe the industrial action threats would have any effect on the independent public offering(IPO) of a majority of Royal Mail shares, expected in the coming weeks following the government’sannouncement this month of its intention to conduct an IPO.
He commented: “Industrial action is not necessary; Royal Mail management are continuing to talkto the CWU and we encourage both sides to resolve this dispute. Action taken by the CWU will notalter the government’s decision to sell shares in Royal Mail in this financial year.”
He said the UK’s parliament decided more than two years ago that selling shares in Royal Mail “was the right thing to do to secure Royal Mail’s future and protect the six-day-a-week universalpostal service”, and said he was hopeful that a strike could be avoided.
The CWU last Friday served formal legal notice to Royal Mail of its intention to ballot RoyalMail CWU members for strike action. The result of the ballot will be announced on 16 October, andif there is a ‘yes’ vote, the earliest that strike action could take place would be 23October. This is the first national strike ballot in Royal Mail since 2009 and would affect115,000 postal workers in Royal Mail and Parcelforce. The dispute is over pay, pensions and theimpact of privatisation on job security, terms and conditions, the CWU said.
The UK government spokesman said it was still unclear whether the Royal Mail IPO would takeplace before 23 October, but said it “would be publishing the prospectus in the coming weeks, andthe timetable will flow from that”.
A source close to Royal Mail confirmed that the IPO timetable would not be delayed by theplanned strike action and he doubted whether it would significantly affect the share valuation. Hesaid the initial share price “would take into account the fact that Royal Mail had a unionisedworkforce” and the IPO prospectus would make reference to the fact that there were “certainindustrial-relations issues to be resolved”.
But he said it was clear that the CWU’s current strike ballot was a thinly disguised protestagainst Royal Mail’s privatisation, predicting that the political dimension to the unrest wouldsubside once the IPO had been completed.
Some media incorrectly reported that Royal Mail had caved in on Friday to union demands overRoyal Mail pensions protections in order to prevent the threatened strike action, although a RoyalMail spokesman stressed that this was not the case and that its concession on pensions had beenmade two weeks ago.
Royal Mail said it was “very disappointed” that the CWU had confirmed its intention to hold anational industrial action ballot of its members. It said a poll commissioned by Royal Mail hadfound that the majority of British adults think that the CWU should accept the offer and call offplans to strike.
Royal Mail stressed that it was “currently business as usual for Royal Mail and ParcelforceWorldwide”, although it warned that past strikes had strengthened competition to Royal Mail. Itpointed out that UK Mail, formed as a courier company in the 1970s, expanded into parcels deliveryduring a Royal Mail strike in 1978, while the DX Group was formed after a Royal Mail strike in the1970s. It said Home Delivery Services was also born out of a Royal Mail strike in 1971, beforebecoming Home Delivery Network in 2008 and subsequently Yodel.
A Royal Mail spokesman said: “Any industrial action, or the possibility of disruption, isdamaging to our customers, and our business, especially in the run up to Christmas, our busiesttime. It therefore has a direct bearing on our ability to sustain good quality, long-termemployment for our people.”
He said Royal Mail had proposed a “highly competitive” three-year agreement that included anincrease in base pay over three years and legally-binding protections on relevant employees’ termsand conditions.
“While this ground-breaking offer has been rejected by the union, it has acknowledged that itwas a significant offer and discussions are ongoing,” he said. “We are committed to reaching anagreement with the CWU as soon as possible to give our customers and employees continuedstability.”
Asked whether the threatened industrial action would reduce interest in the IPO offering, hepointed to research just published by the independent research organisation Rapid Ratings thatrated Royal Mail the financially strongest of any international mail and parcels operator.
Rapid Ratings’ updated financial health rating (FHR) of Royal Mail, published on 17 September,gave the UK postal group “an outstanding FHR of 86, based on its Annual Report and FinancialStatements 2012-13” – a sharp upgrade over its FHR calculations of 64 for FY 2012 and 36 for FY2011. The organisation assessed Royal Mail’s financial health as better than its peer group on fiveout of six broad criteria: sales performance, working capital efficiency, cost structureefficiency, debt service management and overall profitability.
Rapid Ratings said in the last two years, Royal Mail has posted “robust improvements in salesperformance and spectacular increases in net profitability”, leading to this “Low Riskclassification” that placed Royal Mail “squarely among the strongest names in any industry”. ItsFHR rating of 86 placed Royal Mail ahead of Austria Post on 85, Deutsche Post DHL and SingaporePost on 79 and FedEx on 74.
Rapid Ratings stressed that neither the UK government nor Royal Mail “nor their bankers northeir advisors” paid for or took part in its rating process, and that the firm’s ratings were basedon “entirely quantitative measurement of a company’s financial and operating efficiency, running ona scale of zero/worst to 100/best”.
In its latest ratings, it gave UPS a score of 63, Canada Post scored 52, PostNL rated 51, LaPoste scored 48, USPS had an FHR of 27, and TNT scored 24.
