What went fallacious for Royal Mail?

Royal Mail‘s latest £3.57 billion takeover bid by Czech billionaire Daniel Kretinsky’s EP Group comes against a backdrop of a £300 million operating loss, cuts to delivery days and missed targets.

Royal Mail owner International Distribution Services has said it has agreed to an offer which would see EP Group buy IDS for 370p per share, while offering a series of ‘contractual commitments and intentions’ to protect public service aspects of the Royal Mail.

IDS said if the deal goes through – it could be blocked by government – Royal Mail would continue its universal service obligation to one-price-goes-anywhere first-class post six days a week, and keep the company’s branding and UK headquarters.

It also said it would protect existing employment rights of all IDS staff, and that there is ‘no intention to make any material changes to overall headcount or reductions in the number of frontline workers’ beyond existing plans.

But Royal Mail has been beset with issues in recent years after the controversial decision to privatise the national postal service in 2013, and the deal looks to cement proposals to switch second-class letter deliveries to every other day.

Britons have complained of missed deliveries, poor service, closed delivery offices and stamp prices which have increased by more than 100 percent. 

With its roots dating back more than 500 years, Royal Mail employs more than 150,000 people and is still seen as a key part of national infrastructure, despite being privatised in 2013.

According to his takeover offer, Mr Kretinsky has no immediate intentions to change that, with a promise to maintain key public services including one-price-goes-anywhere first class post six days a week.

The offer also includes a promise to keep the company’s branding and UK headquarters for at least five years, meaning little will change for customers.

Since the takeover the business has been plunged into debt, recording operating losses of £319 million in the first six months of this financial year – £100 million more than the previous year.

Ofcom launched an investigation into Royal Mail last week, after it said it delivered less than three-quarters of first-class post on time in the last year. 

Millions of Britons have complained of poor service and deliveries going missing – with Ofcom already fining Royal Mail £5.6 million in November after ruling it missed delivery targets.

Jasmine Moulton, from Cheshire, previously told the BBC how her three-year-old son missed a vital surgery because letters from their local NHS Trust failed to arrive. 

She received a phone call at the start of the year informing her that both her children had missed medical appointments – and her son, Joshua, should have had surgery in December. 

She said: ‘It stresses me out every day because I just think, how many other appointments have we missed? And just not knowing when we’re going to be able to move on. And seeing him suffering.’ 

Under Ofcom rules, Royal Mail is required to deliver 93 percent of first class mail within one working day and 98.5 percent of second class mail within three working days, and complete 99.9 percent of delivery routes for each day on which a delivery is required. 

But for 2022/2023, Royal Mail delivered just 73.7 percent of first class mail on time, and 90.7 percent of second class mail on time. It also only completed 89 percent of delivery routes on each day. 

Families across the UK have reported missing crucial post including medical appointments, surgery dates and birthday and Christmas post. 

And Royal Mail wants to cut deliveries further. New proposals revealed in April would see the company deliver second-class letters only every other weekday, while keeping a six-day service for first-class post.

It’s also facing increasing competition: Royal Mail no longer has an exclusivity deal with the Post Office on parcel delivery – since the increase in parcel deliveries seen during the pandemic, the Post Office has also signed deals with DPD and Evri.

Staff members have reported increasing pressures with increased parcel workloads leaving them unable to cope.

Despite increasing revenue with stamp price hikes, Royal Mail faced crippling strikes in 2022 amid a row over pay and working conditions. 

This has been resolved, but Britons report services continue to decline and have been left frustrated after hundreds of delivery offices have slashed opening hours.

Announcing the takeover bid, IDS chairman Keith Williams said both parties ‘are acutely aware of their responsibilities to IDS and particularly to the unique heritage of Royal Mail and its obligations as the designated universal service provider of postal services in the UK’.

‘The IDS board has negotiated a far-reaching package of legally binding undertakings and commitments which provide our customers, employees and broader stakeholders with important safeguards.’

The potential sale has already attracted heavy scrutiny, with senior politicians and unions voicing concerns over the future of the postal service, which was privatised in 2013.

Business Secretary Kemi Badenoch met IDS bosses earlier this month for talks on the deal, and underlined the need to protect services for the vulnerable, those in remote areas and small businesses.

Shadow business secretary Jonathan Reynolds said on Wednesday: ‘Royal Mail is an iconic British institution with a unique place in our society and infrastructure. Labour will take the necessary steps to safeguard its undeniable identity and place in public life.

‘These assurances are welcome that Royal Mail will retain its British identity and safeguard its workforce with no compulsory redundancies.’

Mr Kretinsky, who is already a 27 percent shareholder in IDS, is said to be known as the ‘Czech Sphinx’ and has a raft of other investments, including stakes in London football club West Ham United and supermarket giant Sainsbury’s.

He said Royal Mail is ‘part of the fabric of UK society and has been for hundreds of years’.

‘The EP Group has the utmost respect for Royal Mail’s history and tradition, and I know that owning this business will come with enormous responsibility – not just to the employees but to the citizens who rely on its services every day.’

The bid comes at a crucial time for Royal Mail, which put forward plans to regulator Ofcom earlier this month to scrap second-class letter deliveries on Saturdays and cut the service to every other weekday as part of turnaround efforts.

Communication Workers Union general secretary Dave Ward said on Wednesday: ‘We do welcome some of the commitments that have been made but the reality is postal workers across the UK have lost all faith in the senior management of Royal Mail and the service has been deliberately run down.

‘We will meet with EP Group next week and call for a complete reset in employee and industrial relations, the restoration of postal services and further commitments on the future of the company.

‘We will also be directly engaging with the Labour Party and other stakeholders to call for a new model of ownership for Royal Mail where our members and customers have a direct say in key decisions and the creation of a golden share which will protect a key part of the UK’s communications infrastructure.’