Royal Mail stand-off deepens as Christmas looms

Sitting on a stage in a hall in central London, trade union leader Terry Pullinger belted out a number common on the terraces of Millwall FC — the football club whose fans are known for their fearsome reputation.

Moments later the auditorium erupted, after it was announced that members of the Communication Workers Union had overwhelmingly voted for industrial action at Royal Mail.

“We will fight in every delivery office, and every distribution office, and every parcel office, and every processing centre right across this country every single day if we have to,” said Mr Pullinger, the CWU deputy general secretary.

As electronic communication steadily kills off paper correspondence, Royal Mail is betting that the growth of parcel deliveries that has come with ecommerce will ensure its survival. But a clash over modernisation, technology and how to improve efficiency has dragged an institution that dates back 500 years to the brink of its first nationwide strike in a decade.

While no walkout dates have yet been announced, a strike would threaten disruption during the peak season before Christmas, a crucial period of business for the privatised postal operator that includes the online shopping bonanza of Black Friday.

“It could be very damaging for Royal Mail because you could potentially lose business and not win it back again [as] competitors will fill the void,” said one former senior figure at the company.

The CWU’s range of grievances crystallise around the claim that management is not honouring the “spirit and intent” of a wide-ranging labour agreement signed last year. This included pay rises, new pensions arrangements and a pledge to reduce weekly working hours from 39 to 35 over time, subject to productivity improvements being achieved.

Although the first hour reduction was implemented last year, the second has not been because of disagreement between the CWU and the company over how to fund it.

Union bosses are also unhappy with technology devices they say track workers, and claim that management’s plans could result in up to 50,000 job losses, something the company dismisses as “speculation”.

Royal Mail’s shareholders are also feeling the pain. After a profit warning because of missed productivity targets, the company was relegated late last year from the FTSE 100 index of blue-chip companies, and this year slashed its dividend to help fund a £1.8bn investment drive over five years. Despite an increase in revenues to £10.6bn in 2018-2019, the company’s underlying earnings fell by a quarter.

Royal Mail’s share price, at 220p, has more than halved since chief executive Rico Back took charge in June 2018 and is well below the 2013 stock market flotation of 330p.

In a statement, the company stressed that it wants to “reach agreement and avoid industrial action. Our transformation is about ensuring a more sustainable company, a fairer working environment, the best terms and conditions in our industry.”

While the CWU’s combative stance is a throwback to 1970s militancy, it has combined social media with old-fashioned workplace organising to rally members.

As a loyal backer of Jeremy Corbyn, the leftwing leader of the opposition Labour party, the union has appeared emboldened by his pledge to renationalise UK utilities, including the postal service. But the question is whether it is fighting a losing battle.

The 97.1 per cent vote for industrial action, on a three-quarters turnout of 110,000 members, points to the strength of feeling among Royal Mail employees.

“We want our rights,” said Elias Farah, a postman of 15 years who was close to tears at the CWU event last week. “We will fight to the end”.

Following the end of a mediation process late last week, the two sides will have a week to consider the mediator’s report and a further two weeks to restart talks. The CWU can then serve notice of industrial action.

This could take the form of a 48-hour walkout around Black Friday in order to have maximum impact, with the possibility of follow-up action, according to one union official. “It will be a cranking up rather than down,” they added.

Despite being the leading player in parcels, Royal Mail’s market share has fallen since privatisation in 2013, according to the consultancy Apex Insight. Strikes could hasten this trend and prove a boon to competitors such as DPD and FedEx with lower costs.

“Most large retailers use multiple [parcel] carriers and their contracts don’t specify volumes, so they can switch over from one carrier to another very rapidly,” said Frank Proud, director of Apex Insight.

Recent history suggests that Royal Mail will ultimately push back against the prospect of a strike. Shutdowns were averted two years ago when the company obtained a court injunction that forced the union back to negotiations.

For now, the CWU looks prepared to dig in. To cheers from his audience, Mr Pullinger said last week: “We built [the company], and we would rather smash it to bits than hand it over.”