Royal Mail suffers £1bn annual loss after year of strikes

The group’s owner International Distribution Services (IDS) blamed the downturn on industrial action, which led to an operating loss of £1.04 billion for the year to 26 March, against earnings of £250 million the previous year.

The Communication Workers Union (CWU) said Royal Mail’s financial situation was “very serious,” but attributed it to “gross mismanagement”.

On an underlying basis, Royal Mail saw operating losses of £419 million, against profits of £416 million the previous year. IDS also said the bulk of the loss relates to an impairment charge of £539 million for the value of Royal Mail due to the impact of strikes and the “current risk backdrop”.

Overall, IDS posted a £748 million annual operating loss, against profits of £577 million the previous year, but said it was targeting a return to underlying earnings over 2023-24.

The year-long conflict with the CWU saw Royal Mail suffer 18 days of strikes by postal workers during its crucial Christmas trading season, which cost it £200m. The industrial dispute saw shoppers ditch online shopping in favour of shopping in person, while retailers turned to other parcel carriers over Royal Mail.

But despite the deal, Royal Mail faces further turbulence after chief executive Simon Thompson recently announced he will step down by the end of the year. In his time in charge, Mr Thompson has overseen the first set of strikes since Royal Mail was privatised and a massive and expensive cybersecurity breach, while he was hauled back in front of MPs who accused him of giving them incorrect information.

In addition, it was announced last week that Royal Mail is being investigated for failing to meet its delivery targets in the past year. Regulator Ofcom could hand out a fine after the firm fell short of its performance targets across the 2022 to 2023 financial year for first and second class mail and deliveries.

Some 73.7% of first class mail was delivered within one working day across the year against a target of 93%. For second class mail, 90.7% was delivered within three working days, compared with the target of 98.5%, and 89.35% of delivery routes were completed on the required day, well behind the 99.9% target.

Ofcom said it takes quality of service very seriously and could fine Royal Mail if it cannot reasonably explain why it missed the targets.

Grant McPherson, chief operating officer of Royal Mail, said: “Improving quality of service is our top priority. We are committed to accelerating Royal Mail’s transformation and restoring service levels to where our customers expect them to be.

“We’re sorry to any customers who may have been impacted by our performance during a year that has been one of the most challenging in our history. With the plans we have in place to drive service levels and reduce absence, we hope and expect to see further progress in the coming months.”

A CWU spokesperson said: “There is no doubt that Royal Mail Group faces a very serious financial situation. It is one of its own making due to gross mismanagement, but it is serious nonetheless.

“We now need to see actions rather than words. The toxic environment created by a senior management team that has gone to war with its own workforce needs to end immediately.

“In recent weeks, there has been no let up on the culture of imposition, disregard for quality of service and the destruction of the service to the public. Royal Mail Group is at a crossroads. It cannot and will not survive without taking the workforce with it through this period.“