Has privatisation been a success?

Almost a decade after it was sold by the government, Royal Mail is poised for another major shake up as Czech billionaire Daniel Kretinsky’s EP Group agreed to buy the 500-year-old service for £3.5 bn.

If the deal goes through – which analysts still doubt will actually happen – it will take the organisation into fully foreign ownership for the first time, and could usher in a series of”modernisation measures” which Kretinsky believes will return it to profitability.

However despite the business being, technically, fully private, the echoes of its public past can still be heard.

The sale would be subject to a list of “contractual commitments and intentions” to protect public service aspects of the Royal Mail.

Royal Mail would also continue its universal service obligation to one-price-goes-anywhere first-class post six days a week, and keep the company’s branding and UK headquarters.

Fresh ownership would mark the biggest change to the organisation since the controversial move to privatise the service in 2013, which saw current owners IDS take full control of the company two years later.

Since then, the service has been plagued by controversy, ranging from ailing operational performance to the recent Post Office scandal.

But how has the British icon actually changed in the decade since it was sold?

Has Royal Mail made a profit since going private?

Privatisation did little to change the company’s profitability.

For many years profits remained at a consistent, if unimpressive, level, save from a spike in 2014.

The Covid-19 years did give the business a welcome boost, with increased deliveries helping to bring figures to their healthiest in a decade.

But that progress came crashing down in 2023, when a series of setbacks – which included postal worker strikes, a cyber security incident, a £5.6m Ofcom fine for missed delivery targets and the loss of its 360-year monopoly to deliver parcels from post office branches – meant the firm ended the year with a £110m deficit.

The company is yet to post its results for its current financial year, but has said adjusted operating profit, excluding voluntary redundancy costs, should be “broadly in line” with earlier guidance.

Forecasts published in January said the £169m operating loss accumulated in the first half should be counteracted in the second half, leaving IDS at “about break even”.

Weakening public support

Despite its fair-to-middling financial performance, Royal Mail has struggled to keep the public onside since privatisation.

Customer complaints have been increasing year-on-year since the government sold the service, with the volume almost doubling between 2018 and 2019.

Predictably, the amount of compensation the business has paid out to unhappy customers has also increased substantially, peaking at more than £13m in 2022.

The majority of payouts have been to compensate customers for lost packages, but the number of complaints relating to damaged items and failed re-deliveries is also rising.

Targets missed, branches close

This fading public support since its privatisation is not surprising when you look at Royal Mail’s performance.

Once upon a time, you could count on the service to get your First Class post to its destination within one working day, but since 2021 on-time delivery has become less and less assured.

In the year ending March 2024, the company’s performance dropped to a record low, with almost a quarter of all First Class post arriving late.

It has also become increasingly difficult to visit a full-time Royal Mail post office, with thousands of locations closing over the past decade.

Is this down to the businesses’ privatisation? Probably not. The number of branches had been going down for many years before the government sold the company, most likely fuelled by many key services moving online.

However, the decision to close so many locations – especially those in rural areas – has certainly not helped Royal Mail to win back the public.