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Rubbing his hands: Daniel Kretinsky
Jolly good that Kemi Badenoch has sat down with Martin Seidenberg, chief executive of Royal Mail owner International Distributions Services (IDS).
The Business Secretary outlined the Government’s demands should Czech billionaire Daniel Kretinsky’s £3.5billion bid be accepted.
The nation, one supposes, is meant to be reassured by undertakings to maintain Royal Mail headquarters in Britain and keep faith with the universal service obligation.
Badenoch’s first mistake was to hold the meeting at all.
It might be acceptable for the Government to engage with Singapore-based Donald Tang who is proposing to list fast-fashion giant Shein in London. That would be an enormous boost for the London Stock Exchange and the City, whatever qualms there may be about its Chinese supply chain. It is quite another thing to raise the hopes of the Czech billionaire and IDS investors that there is a deal to be done. Circumstances are very different.
But I cannot get out of my head how the late Cabinet Secretary Jeremy Heywood (who also embraced failed financier Lex Greensill) brought Softbank boss Masayoshi Son to Downing Street. He persuaded Theresa May and then Chancellor Philip Hammond that it was a brilliant idea to sell Arm Holdings to the Japanese tycoon for £22.5bn because it showed the UK was open to inward investment post-Covid.
Arm has since switched to Nasdaq in New York and is valued at £95billion. And by the way, with its migration to the design of AI semiconductors, it potentially could have become the $1 trillion enterprise targeted by Chancellor Jeremy Hunt.
What has any of this to do with IDS and the Royal Mail? It demonstrates that business has a record of making politicians look foolish. A pledge to keep the HQ in London is meaningless, especially when one considers the fastest growing part, parcels outfit GLS, is based on the Continent. Whatever ownership for the Royal Mail emerges, the universal service obligation – deliveries six days a week to the last mile – is sacrosanct.
Several factors have made the Royal Mail easy prey for Kretinsky. The car crash that is snail mail has been obvious for decades as email, messaging apps and other online facilities have caused the numbers of letters in the system to nosedive from 20billion a day to 7billion, on route to 4billion.
Management has struggled to modernise the network. It has faced determined union obstruction along the way. One only has to visit a local sorting office to pick up an undelivered letter to recognise unreformed labour practices and a lack of any understanding of customer service.
Government and regulators must also take a share of the blame.
Ofcom is regarded highly for its policing of telecoms and understanding of technical issues. But the time it takes for regulatory changes to be made is soul-destroying. There is absolutely no reason that the new two-tier system, with powers to raise prices for first-class post, should not already have been implemented other than political expedience.
Anti-inflation is a government priority and Rishi Sunak doesn’t need a row over the cost of first class deliveries.
Instead of seeking to negotiate a way in which it is possible for the Czech buyer to have his way with IDS, the Government, regulators and Royal Mail chairman Keith Williams should not have engaged at all.
This, by the way, is not some anti-Czech crusade. My late father was a Czech citizen and among all the former Soviet bloc countries, the Czech Republic has adapted best to democracy and free market capitalism.
The Royal Mail is a British public utility and the taxpayer is on the hook for its crown guaranteed pension fund.
Once the company is sold, command and control passes overseas. A whole eco-structure is disrupted. The tax domicile shifts and HMRC pays a price.
It is naïve to think anything else is possible. IDS’s pusillanimous board and investors should tell Kretinsky to take a hike, and encourage Williams to step down and bring in a fresh chairman with inner strength. Instead of hobnobbing with the invader, Badenoch should invoke the National Security and Investment Act without delay.
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