Royal Mail to cut 2,000 management jobs as profits tumble

Royal Mail will axe 2,000 management jobs as it looks to trim £130m from its wage bill, after profits slumped and the company decided not to pay a dividend next year. 

The UK postal service said it was undertaking a three-step plan to address the impact of coronavirus that would also involve slashing £300m in capital expenditure and speeding up a modernisation drive. 

At the same time, it is working with regulators and the government on a review of the universal service obligation, under which it has to deliver mail throughout the country at uniform price six days a week.

“In recent years, our UK business has not adapted quickly enough to the changes in our marketplace of more parcels and fewer letters. Covid-19 has accelerated those trends, presenting additional challenges,” said chairman Keith Williams, who took on an interim executive role following the abrupt exit of chief executive Rico Back last month after less than two years in the job.

The departure capped a turbulent period marked by a trade union dispute and weak financial performance, which had dragged the share price down to its lowest level since the company’s stock market flotation in 2013.

The FTSE 250 group’s pre-tax profit fell by a quarter to £180m in the year ended March 29, weighed on by its core UK operation that will be “materially lossmaking” this year.

Group revenues increased 2.4 per cent to £10.8bn and with no final dividend, investor payouts will also be suspended next year. Underlying earnings were in line with a previously indicated range.

Royal Mail said the redundancies would affect about half of its senior leaders and most senior managers, in central and support areas rather than field operations. Its overall workforce size is about 140,000.

In recent weeks, Czech billionaire Daniel Kretinsky has built an 8.2 per cent stake in Royal Mail through Vesa Equity Investment, a vehicle he controls with Slovakian business partner Patrik Tkac. The move has fuelled speculation of a possible takeover or break-up of the company, which also runs an international parcels arm, GLS.