Royal Mail braced for £350mn loss

Royal Mail has warned that it could swing to a loss of up to £450mn and be forced to axe as many as 10,000 jobs, in response to “damaging” industrial action. 

The postal service – which has reinvented itself as International Distributions Services (IDS) – reported a UK operating loss of £219mn between April and September this year, and a trading cash outflow of £274mn. Management claimed that strike action had already cost the business £70mn, and complained that “agreed productivity improvements” had been obstructed. Shares have fallen by 10 per cent in response to the trading update.

The Communication Workers Union has staged six days of industrial action so far this year, and has formally notified Royal Mail of a further two days of strikes this month. Workers have also threatened to strike for 16 days in the run-up to Christmas.

The group is braced for a full-year adjusted operating loss of around £350mn, excluding voluntary redundancy costs. However, it said this may increase to £450mn “if customers move volume away for longer periods following the initial disruption”.

Royal Mail estimates that it will have to cut around 5,000 full time roles by March 2023 and 10,000 by the end of August 2023, on a rolling 12 month basis. This is likely to involve between 5,000 and 6,000 redundancies.

The group announced a transformation plan in 2019, and identified savings of £350mn from job cuts, route improvements and automation. However, the strategy has prompted a fierce backlash from workers. Meanwhile, letter volumes have fallen by 24 per cent since 2019, and parcel volumes have plateaued. 

Amidst the turmoil, there is a glimmer of hope. General Logistics Systems (GLS) – the group’s international arm – is on track to meet full year expectations of an adjusted operating profit between €370 – €410mn (£319 – £353mn). Earlier this year, management said it would consider separating Royal Mail and GLS unless “significant operational change” was achieved in the UK. Hold.

International Distributions Services will publish its half-year results on 17 November.