Royal Mail owner says it cannot rule out job cuts after £120m Budget hit

Martin Seidenberg, chief executive of parent firm International Distribution Services (IDS), said measures from Rachel Reeves’ maiden Budget last month will “hit us harder compared to our competitors”.

The firm said a £134 million write-down linked to the national insurance increase has stopped it returning to profit for the past six months.

The company, which employs around 130,000 workers in the UK, said the jump in costs means that reforms to its universal service obligations – which currently requires it to make first-class deliveries six days a week – are “more urgent”.

The Chancellor revealed a £25.7 billion change to employers’ national insurance contributions (NICs) in the Budget, which would increase the rate of the tax and reduce the threshold at which firms must pay.

It is the latest major business to caution that workers and customers could face an impact from the rise in business taxes, which also comes alongside a rise in the national living wage.

Mr Seidenberg said: “We are seeing quite a significant burden from the national insurance increase.

“We are looking at a bunch of measures but it is too early to say what we will do. They will be about pricing, cost efficiencies and other ways we can move forward.”

When asked whether this could lead to job losses, he said it was “too early to say” but would not rule it out.

“Anything that would impact our people would be last resort but we are working this through,” he added.

The boss said the company – which agreed a takeover deal earlier this year – could look at increasing automation in order to help it address the increase in its cost burden.

Mr Seidenberg said the rise in its costs “increases the need” for service reform, with the company hoping for a decision from regulator Ofcom of a review in its universal service obligations (USO) by early next year.

In September, Ofcom said it is considering allowing Royal Mail to ditch Saturday deliveries for second class letters as part of the consultation.

It came as IDS improved its profitability over the past half-year and hailed progress in its major transformation plan.

The company has undergone a major overhaul which saw it axe thousands of jobs from 2022 as Royal Mail was impacted by industrial action.

It also comes as IDS awaits approval over its proposed £3.57 billion takeover by Czech billionaire Daniel Kretinsky.

The company struck the controversial deal in May but the move is now being reviewed by the Government under the National Security and Investment Act.

On Thursday, IDS reported an adjusted operating profit of £61 million for the 26 weeks to September 29, up from a £169 million loss a year earlier.

However, it made an £87 million loss once write-downs were taken into account.

It also revealed that revenues increased by 8.2% to £6.34 billion for the half-year.

This was supported by 10% growth in Royal Mail despite weaker than expected parcel revenues over the period.