Royal Mail strike action has cost business £200m

Royal Mail has revealed the cost of strike action has now cost the business around £200million, pushing the postal group to a hefty operating loss.

The group’s owner, International Distributions Services, revealed Royal Mail’s operating losses mounted to £295million in the first nine months of its fiscal year, with the group hit hard by multiple of strikes by workers.

The company said it was still on track to cut its workforce by 5,000 by March and 10,000 in total by August.

But, it said the number of voluntary redundancies needed would be far less than the 5,000 to 6,000 it initially expected, thanks to employee turnover and cutting variable full-time staffing. 

In the three months to the end of December, letter volumes fell by 7 per cent and parcel volumes slumped by 23.6 per cent, IDS said.

The group faces mounting pressure on a number of fronts, with bosses under fire for their handling of the industrial dispute and a recent cyber attack leaving it unable to deliver international parcels. 

Total IDS group revenue for the three months to 31 December came in at £3.3billion, down 8.1 per cent year on year. Royal Mail revenue fell to £2billion from £2.4billion, while GLS rose by £200million to to £1.3billion. 

IDS said it now expected to be cash negative for the year and warned it would have to sell assets to reverse this position. It continued to target a return to adjusted operating profit in 2024-25.

‘Performance continues to be driven by a return to structural decline in letters, weaker retail trends, the impact of industrial disruption (18 strike days year to date), and lower (Covid) test kit volumes,’ IDS said in today’s trading update.

It added that it expected an adjusted operating loss around the mid-point of the company’s £350million to £450million range.

Strikes: Many Royal Mail workers went on strike for a total of 18 days over the crucial festive period

The group added: ‘This assumes no further days of strike action in the fourth quarter and the Communications Workers Union accept a pay settlement in line with the best and final pay offer. 

‘The full year outturn will also be subject to potential customer attrition in Q4 and excludes any charges for voluntary redundancy costs.’

Royal Mail has recently resumed talks with the Communication Workers Union, but it has been a lengthy dispute and the union this week launched its third ballot for industrial action. 

It was also revealed earlier this week that Royal Mail boss Simon Thompson had been called back to appear in front of MPs after they accused him of providing information that ‘may not have been wholly correct’ in a bruising recent appearance.

Mr Thompson has been asked to clarify his statements to the Business, Energy and Industrial Strategy Committee ‘at the earliest opportunity’, according to committee chairman Darren Jones.

After Mr Thompson spoke last week, MPs said they were sent hundreds of complaints questioning his claims.

In the session, he denied using technology tracking how fast employees were making deliveries and disputed claims that it is Royal Mail policy to prioritise parcels over letters, something that could breach rules.

IDS shares rose today and were up 2.64 per cent or 5.80p to 225.40p this morning, having fallen over 47 per cent in the past year. The company has declined to pay shareholders a half-year dividend

Matt Britzman, an equity analyst at Hargreaves Lansdown, said: ‘It’s not usually the case that a projected operating loss of around £400million is met with a positive reaction from markets, but such is the state of Royal Mail’s parent company, IDS, this could have been a lot worse. 

‘Strike actions have plagued Royal Mail over the last year, the 18 days of strikes was 6 more than IDS had originally built into its guidance. Credit should go to management, that actions taken to mitigate the impact of more recent strikes have limited the financial impact.

‘It’s certainly no time to celebrate though, strikes have still cost to the tune of £200million over the past 9 months, as battles with Unions over worker pay have lingered for much longer than anyone would have wanted. Current guidance is based on no further strikes and the Union accepting Royal Mail’s best and final offer – there’s no guarantee any of that happens.’