A first-class fiasco: Politicians set to wave through disastrous Royal Mail takeover

Amid the furore of an election campaign, in which the desire to be seen as business friendly and pro-economic growth have been dominant themes, the future of the Royal Mail, a vital part of the nation’s infrastructure, barely has featured.

The board of Royal Mail owners, International Distributions Services (IDS), accepted a £3.6billion bid from the Czech billionaire Daniel Kretinsky as if there were no other choice.

The casual way in which a vital public utility, which provided critical services through the horror of Covid-19, is being disposed of is a source of fear and loathing for the company’s workforce.

‘This could be a disaster. If this is about asset stripping, which we know is definitely possible, the debate has to be how do we avoid it,’ argues Dave Ward, general secretary of the Communications Workers Union (CWU).

Ward warns City rules mean Royal Mail could fall into overseas ownership ‘within the next 28 days,’ while all eyes are focused on the outcome of the General Election.

His frustration that the fate of such a critical company could be settled without a proper public debate is palpable.

The CWU chief disputes the narrative of the IDS board that the company largely has been destroyed by union intransigence and the decline in the letter post, which has seen volumes plummet from a peak of 20billion a day to 7billion.

He accuses the Royal Mail board, headed by former BA boss Keith Williams, of ‘ripping up an agreement which allowed for modernisation’ because it expected a takeover bid.

The CWU boss is furious about the way in which Britain’s public utilities have been betrayed and hates the idea that the same fate could await the nation’s postal services.

‘It’s a very extractive model within the UK,’ he argues. ‘All it does is funnel money out of the business to shareholders.’

Ideally, in Ward’s view, a Labour government would step in and nationalise the Royal Mail. But he is politically astute enough to recognise that renationalisation is not going to happen. 

He does believe there may be a social ownership model, akin to John Lewis, where all stakeholders – workforce, consumers and managers – have a say in how the enterprise is run.

Break up fears: Dave Ward, general secretary of the Communications Workers Union 

At the time of privatisation, an effort was made to align the interests of the Royal Mail’s 150,000 strong workforce with management.

This was done by awarding 10 per cent of shares in the firm to staff. One might have hoped that this would act as a bulwark against a future takeover.

Ward believes that horse has bolted. As employees left, and management siphoned off executive bonuses, the shareholding of his members has shrunk to 5 per cent.

In contrast, Kretinsky, advised by JP Morgan and others, has built up by stealth a 27.6 per cent holding which is close to giving his EP Group effective control. 

In spite of the powers of intervention granted by the National Security & Investment Act, the Tories at no stage chose to put serious obstacles in its way.

Ward is also critical of regulator Ofcom. But successive management teams at the Royal Mail have claimed that it is the CWU which has stood in the way of modernisation and left it open to a takeover. 

Maybe. But successive generations of management have abrogated responsibility.

Ward notes that in Germany and France postal services have used profitable subsidiaries and acquisitions to help fund a universal service.

IDS has taken exactly the opposite course by separating its successful European arm Global Logistics Service (GLS) and erecting barriers against cross-subsidisation.

Ward has not given up on the idea of forging agreements with the new owners.

But following meetings with Kretinsky’s representative Roman Silha yesterday he warns the commitments given ‘are neither strong enough or long enough’. 

Further talks, including with Kretinsky, will take place. No one should expect a breakthrough.