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Royal Mail chief warns Labour: support postal reforms or face the consequences

September 7, 2024

Long-running talks between Royal Mail and the Communication Workers Union are on the brink of collapse, with the company’s board thought to have threatened to put the loss-making postal service – the regulated UK entity that delivers to every address in the country – into a form of administration if a deal cannot be agreed.

Martin Seidenberg, CEO of International Distribution Services (IDS), the parent company of Royal Mail, has issued a stern warning to the government, stressing that ministers will be held accountable if they do not support changes to the postal operator’s universal service obligation (USO).

This requirement mandates uniform pricing for deliveries across the UK, regardless of location, but is increasingly seen as outdated amid declining letter volumes and rising parcel deliveries.

Seidenberg, 51, emphasised the urgency of reform, arguing that without ministerial backing, the burden will ultimately fall on the government. “The problem will land on the desk of the government,” he said in an interview, just days before Ofcom announced it would consult on changes, including potentially scrapping Saturday second-class deliveries.

Royal Mail has been lobbying successive governments and Ofcom for adjustments to the USO, which it views as a critical obstacle to its evolution from a struggling letter carrier to a competitive parcel delivery service. Ofcom’s forthcoming consultation, expected early next year, could herald significant changes, such as reducing delivery days and refocusing resources on the booming parcels market.

Seidenberg, who took the helm of IDS last year after leading the profitable European parcel arm GLS, said without reform, postal workers would be “walking around with an empty bag… and then you lose tons of money.” He has repeatedly urged both Conservative and Labour ministers to act swiftly, making it clear that he will continue pushing for changes until a decision is made.

Meanwhile, Royal Mail is navigating a £3.57 billion takeover bid from EP Group, backed by Czech billionaire Daniel Kretinsky, its largest shareholder. In a bid to address financial pressures, the company recently announced a 30p increase in the price of a first-class stamp to £1.65, effective from October 7, citing the “urgent” need for revenue improvement.

The Department for Business and Trade has acknowledged the significance of a reliable and affordable postal service, with a spokesperson stating that it is crucial for UK businesses. Ofcom has launched a review to ensure the postal service reflects contemporary usage patterns, and the government is considering its recommendations.

Seidenberg’s tenure has been marked by efforts to stabilise Royal Mail amid financial losses, shrinking market share, and the fallout from a prolonged industrial dispute that saw 18 days of strikes over pay and conditions. Despite some progress, Royal Mail has missed its delivery targets for two consecutive years and faces potential fines from Ofcom.

Under Seidenberg’s leadership, the company has focused on enhancing operational efficiency and improving delivery reliability. This includes hiring logistics experts and investing in fixed-contract employees to address staffing shortages. He has also implemented incentives for workers to hit key performance targets, resulting in the best Christmas delivery performance in four years.

Despite these efforts, Seidenberg remains adamant that without reform of the USO, Royal Mail’s long-term viability remains in jeopardy. “The future is, I’m afraid to say, parcels,” he said, highlighting the shift from traditional letter volumes, which have plummeted from 20 billion annually in 2004-05 to just 6.7 billion today.

As Royal Mail looks ahead, Seidenberg is optimistic about the potential benefits of Kretinsky’s takeover but warns that regulatory delays and a lack of urgency could hamper progress. Ofcom’s consultation is expected to conclude next summer, around the time the postal industry prepares for its peak Christmas season, but Seidenberg is pushing for faster action, insisting, “It just needs urgency.”

With plans to expand into parcel lockers and electrify its vehicle fleet, Royal Mail is positioning itself for the future. However, without the critical reforms to its service obligations, Seidenberg cautions, “That’s a tricky one, because I wouldn’t even want to think about it.”