Royal Mail takeover by Czech billionaire approved. What does it mean?

Under the new deal, workers will get a 10% share of any dividends paid out to Kretinsky.

Other concessions include the formation of a workers group to meet monthly with the directors of Royal Mail, no raid on the pension surplus, and no compulsory redundancies until the end of next year.

However, Lord Prem Sikka, a Labour peer and academic, questioned the strength of the deal’s protections.

“Some assurances about postal deliveries, workers’ rights but how long will they last?” he posted on X. “Another essential service owned from abroad. Shareholders don’t experience degradation of service.”

The Royal Mail has endured a turbulent decade since it was privatised in 2013. A sharp drop in service demand and management failings contributed to a £348m loss in the year to March 2024.

Previously, the Royal Mail had asked the regulator to let it reduce deliveries to every other weekday, a reduction it claimed would give the ailing service a “fighting chance”.

What did privatisation do to the Royal Mail?

The Royal Mail was founded in 1516 as a royal postal service. For the next five centuries, it expanded, managed first by the crown and then by the state.

But with the advent of the internet changed everything for the company. People sent fewer and fewer letters. So in 2011, the Conservative-Liberal Democrat coalition privatised 90% of the company, hoping that private enterprise could transform retain the service’s profitibality.

“The privatisation of the service was meant to fix a big problem – people sending far fewer letters,” Johnbosco Nwogbo, lead campaigner at We Own It, told the Big Issue earlier this year. “It was meant to bring in a whole bunch of technology and new techniques, in order to make it profitable while they continue to deliver a universal service provision.”

However, service quality has declined further as shareholders seek to extract more value from the once-great institution. Delivery offices and capacity have been cut, while prices rice. The cost of a first-class stamp has increased by almost 50% in just five years. In 2021, investors were paid £400m in dividends.

“The Royal Mail is supposed to keep Britain connected. The profit motive is distant from that principle, because there is an incentive to cut costs and reduce services so that shareholders can continue to profit,” Nwgobo said.

“Profit from the Royal Mail – like from sending parcels – should go back into the Royal Mail, to make up from the loss from delivering to the more far-flung parts of the country.”

Last week, Ofcom fined the service £10.5m for failing to meet delivery targets. This has huge consequences for customers, says Tom MacInnes, director of policy at Citizens Advice.

“Letter delays leave millions of people missing urgent medical appointment letters, legal documents and benefit decisions,” he warned. “This comes despite Royal Mail routinely hiking their prices, meaning consumers are getting less despite paying far more.”

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