What would happen to the UPSO?

Royal Mail bosses have threatened the nuclear option in the protracted dispute with workers over pay and working conditions.

With hopes for a resolution between the loss-making postal business and the  Communication Workers Union (CWU) dwindling, the threat of insolvency presents a unique problem for the broader postal sector, not to mention customers and workers.

Under the Postal Services Act 2011 and the Universal Postal Service Order (UPSO), Royal Mail’s holding company International Distributions Services PLC (LSE:IDS) is legally bound to the ‘one price goes anywhere’ principle of affordable postal services to its competitors including DHL, FedEx (NYSE:FDX) and Yodel.

Despite UPSO, which is overseen by communications regulator Ofcom, being a critical conduit between delivery companies and customers, there appears to be little consideration of what would happen to it in the event of a Royal Mail insolvency.

Royal Mail was fairly circumspect on the issue.

In a statement sent to Proactive via email, a Royal Mail representative said: “Throughout the dispute we have highlighted the need for Royal Mail to transform, and been very clear about the damaging impact of strike action.”

The representative suggested that strike action had caused an estimated £200mln in losses in the past nine months, while adjusted operating losses for the year ending March 26 are expected to be around £350mln to £450mln for the year.

“That is why we are doing all we can to get agreement with the Communication Workers Union (CWU), including making numerous improvements to our offer throughout the negotiations with the CWU.”

That does not really answer the question.

An Ofcom spokesperson told Proactive that it “can’t comment on speculation”, though the regulator pointed to Part 4 of the Postal Services Act 2011, which states: “A company which is a universal service provider has no power to pass a resolution for voluntary winding up without the permission of the court.”

The government appears to have a say in how Royal Mail, as a universal service operator, goes about declaring insolvency, but there remains a question mark over the fate of the UPSO.

Proactive has asked the CWU and Unite the Union for comment.