Royal Mail parent blames $1.3 billion loss on strikes, lagging productivity

Reporting a $1.3 billion loss for 2022-2023 on Thursday, International Distributions Services said the poor performance was due to industrial action by postal workers in its Royal Mail division and a failure to boost productivity. File photo by Andy Rain/EPA-EFE

May 18 (UPI) — The parent company of Britain’s Royal Mail blamed strikes by postal workers and a dearth of productivity gains for a $1.3 billion loss in its domestic mail business Thursday as it reported its worst annual results in years.

International Distributions Services’ operating loss for the year to March 26 was limited to $930.5 million thanks to a $368 million profit made by General Logistics Systems, its ground-based parcel delivery business in Europe and North America, the group said in a news release. The group’s 2021-2022 operating profit was $717 million.

Royal Mail’s revenue fell by $1.4 billion as the number of letters and parcels carried fell by 681 million and 312 million respectively, while stronger margins at GLS saw its revenue jump by $536 million even though it carried fewer packages than in the previous year.

Royal Mail’s adjusted operating loss of $521 million was due to industrial action, failure to deliver the in-year benefits of planned productivity improvements, lower COVID-19 test kit volumes and a weaker online retail market — but that was partly offset by successful action to reduce costs and rightsize the business in the second half of the year, IDS said.

An end in sight to months of strikes by the Communication Workers Union, which is balloting members on a 10% pay rise and profit-sharing package, came too late for CEO Simon Thompson, who quit Friday leaving Royal Mail seeking its fourth CEO in four years.

Cost-cutting measures included laying off 10,000 Royal Mail workers for a $186 million saving over the next financial year but IDS finance chief Mick Jeavons told the Guardian there was “no further job cut plan, or target”.

The agreement with the CWU and strong progress made on a five-point stabilization plan brought Royal Mail’s final goal into view, said Independent Non-Executive Chair Keith Williams.

“There is now a clear path towards a more competitive and profitable Royal Mail, delivering improved services for our customers whilst further reducing our environmental impact,” he said. “Importantly, if ratified, the CWU agreement provides greater job security and increased rewards — through both pay and profit share — for our employees. Successful delivery of the agreement will be key.

“Quality of service has been significantly affected by industrial action and high levels of absence. I am sorry that we have not delivered the high standards of service our customers expect. Improving quality of service is our top priority,” William said.

“So as we enter 2023-24 we have grounds for optimism. The economic climate remains challenging, and Royal Mail faces the task of rebuilding business from the damage caused by industrial action.”

Williams renewed calls by Royal Mail for urgent reform of its Universal Service Obligation under which it is required by law to deliver letters to every address in Britain for the same price — $1.37 — regardless of distance. Previous appeals to the government to be released from the obligation have been rejected.

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