Royal Mail ‘at crossroads’ as pandemic parcel boom fades | Royal Mail

Royal Mail has warned that the company is at a “crossroads” and needs to urgently adapt to the post-pandemic environment as parcel deliveries, originally boosted by Covid lockdowns, continue to wane.

It piles further pressure on the postal company, as it struggles to reach a pay deal with unionised staff who are pushing for an inflation-based pay rise as the cost of living soars.

Royal Mail said on Thursday it suffered an 8.8% drop in annual pre-tax profits to £662m, explaining that revenues were flat as the easing of Covid restrictions reduced demand for parcel deliveries. The drop was partially offset by the distribution of Covid test kits, but overall, parcel demand across the UK fell 7% year-on-year.

Chairman Keith Williams admitted that the financial tailwinds of the pandemic “are now dissipating” and that the company was steeling itself for a drop in economic growth and higher inflation that could pose challenges for both its UK and international delivery business.

“We are at a crossroads with the transformation of Royal Mail,” he said. “We need to adapt our business to a post-pandemic world and whilst we are making progress in some areas, more needs to be done in others”.

The news sent shares down nearly 10% on Thursday morning, wiping nearly £400m off the company’s value and making Royal Mail the biggest faller on the FTSE 100.

The courier also faces an ongoing pay claim with staff represented by the Communication Workers Union (CWU), which said Royal Mail’s full-year profits were “earned off the backs of our members hard work”.

“Every single penny of the £758m [adjusted operating] profit was from letter, parcel and test kits collected, processed, distributed and delivered by key postal workers, not by board members and not by shareholders but by our members,” said Terry Pullinger, the CWU’s deputy secretary general.

“It is an outstanding effort delivered during unprecedented times from key workers…The CWU are immensely proud of our members and even more determined than ever to get the the reward, recognition and pay rise that these results prove they deserve.”

The company has so far offered a 3.5% pay rise for workers, with the potential for a further 2% rise for workers who reach certain productivity targets.

However, the union is understood to be seeking an inflation-based pay rise with “no strings attached”. Figures released on Wednesday showed that UK inflation hit 9% in April, its highest level for more than 40 years, following a surge in food, energy and transport costs.

A Royal Mail spokesperson said it wanted to reach an agreement with the CWU as soon as possible. “Our industry is characterised by a race to the bottom on pay and terms and conditions. We will not join that race and will retain our place as the industry leader on pay and terms and conditions. We value the work we do with CWU and remain committed to agreeing a deal.”