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In December the UK Government approved a takeover of that company by the Czech billionaire Daniel Křetínský.
The 49-year-old made his money in the energy sector and is the owner of football club Sparta Prague, as well as having investments in West Ham United and Sainsbury’s.
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The deal, which is worth £3.6bn, includes a ‘golden share’ which means Westminster can veto any changes to Royal Mail’s ownership, tax residency or headquarters and there are restrictions around when dividends can be paid for the first five years of the deal.
Mr Křetínský and his Energetický a Průmyslový (EP) Holdings company will acquire International Distribution Services (IDS), Royal Mail’s parent company, in a leveraged buyout with £2.3bn of the takeover price coming from fresh borrowing.
Before paying any dividends, Royal Mail must have a net leverage ratio (i.e debt to earnings ratio) of 2:1 or less and any such payouts could not be made unless it can ‘reasonably be expected’ there would be no ‘material adverse effect’ on its universal service obligation.
Under the deal, employees will receive a 10% share of any dividends paid out to Mr Křetínský.
Last month Citizens Advice found that close to 11m people were affected by letter delays over Christmas, with 3.4m UK adults facing a serious consequence as a result, including missing vital health appointments, bills, legal documents, letters from the bank, fines, and benefit decisions.
Royal Mail has failed to meet its annual first and second class delivery targets since 2019, and was fined £10.5m by regulator Ofcom last year for breaching its universal service obligation.
When the service was privatised in 2013 it was delivering 92% of First Class post within one day, but that had fallen to 74% by 2024.
One of the restrictions on dividends stipulates that Royal Mail must only equal its on-time score for for the period 1 April 2023 to 31 March 2024.
In the year in which it was privatised Royal Mail received 489,900 complaints, while it received 2.55m in 2023-24.
The Herald spoke to several postal workers, in different depots across Scotland, who said they were facing huge backlogs of mail thanks to cuts in staff levels.
Many said they believed financial cuts were being made ahead of the takeover by Mr Křetínský.
One said: “We don’t have enough staff for the duties we have. The duties are too big and therefore they’re failing every day, so you need more staff in.
“But I think the way the ones at the top are looking at it is that Křetínský is taking over and they want to make it look nice and neat.
“Once you get to a point that you’ve cut it this far, you can say ‘we can operate at this level now’.”
Another said: “They can’t make these kind of cuts and deliver the level of service they’re supposed to, I just don’t see how it’s possible – we can’t get the job done as it is and they think they can take more away from us.
“It’s the worst I’ve ever seen it. I used to love my job, but since Covid I don’t. It just keeps getting worse and worse, since privatisation they keep coming back for more and more – there’s nothing left to suck out of it anymore.”
Another said: “I’ve been doing it 35 years, and once privatisation started that’s when things really started to spiral.
“Royal Mail never made loads of money, but when you had it all together you had a load of products, some would make money and some would lose money but once you start splitting that up and let private companies cherry-pick they’re only going to take what’s profitable.
“They’ve cut down and cut down to the point you can’t cut more.
“I think the way it’s going to go is that Křetínský will buy the company and after a while will say ‘look, the letters aren’t making any money’ and try to force the government to take it back over as a service and concentrate on the packages.”
IDS, the company which owns Royal Mail, also own Parcelforce and its European delivery partner General Logistics Systems, which reported revenues of €5.6bn in 2023-24 with an operating profit of £320m.
Royal Mail, which has a universal service obligation, lost £348m.
Under the terms of the sale to Mr Křetínský’s group, universal service must continue as long as Royal Mail is “directly or indirectly” controlled by Mr Křetínský, EP, or “any person controlled by, or under common control” with the Czech billionaire.
For the first five years the proceeds from any shares in GLS transferred to a third party must be kept inside IDS unless the aforementioned debt ratio, service obligations and delivery scores are met.
GLS cannot be sold for three years from the date of the takeover.
Royal Mail has already applied to Ofcom to reduce its Second Class service to alternate weekdays, with no weekend deliveries, with a pilot scheme operating in parts of Glasgow.
The regulator is running a consultation on the proposals that will run until April 10.
Head of Post for Consumer Scotland Grace Remmington said: “The postal service is a vital lifeline for consumers across Scotland.
“The Universal Service Obligation (USO) supports people to engage with essential services including healthcare, social security and financial services as well as staying connected with family and friends.
“Any reduction in the scope of postal services will inevitably have an impact on consumers.
“In recent years consumers in Scotland have suffered poor reliability when sending and receiving mail, while also enduring sharp increases in the price of stamps.
“It is therefore vital that any changes to the USO deliver a more reliable, more affordable service which is better value for money for consumers.”
Royal Mail said: “Our proposal was developed after speaking to thousands of people across the country and is designed to preserve what matters most for our customers – maintaining a one-price-goes-anywhere service to 32 million UK addresses and First Class deliveries six days a week.
“As Ofcom’s analysis shows, it is no longer financially sustainable to maintain a network built for 20 billion letters when we are now only delivering 6.7 billion. Reform is crucial to support a modern, sustainable, and reliable postal service for our customers, our company and our people.”
Royal Mail workers spoken to by The Herald said the company was already prioritising tracked deliveries over First and Second Class mail, as well as business circulars.
The company has repeatedly denied this practice, but every postal worker spoken to by The Herald said they’d been told to prioritise tracked items.
One said: “I was off for three weeks, and the likes of door-to-doors, circulars, are supposed to be done each week.
“When I came back those weeks worth of door-to-doors hadn’t been touched because they hadn’t staffed the duty properly – a lot of businesses still rely on these things.
“If someone is off who is a driver they kind of have to cover them, but if they’re not then it’ll just be ‘you’re on your own today, just do tracked packages’.
“They’ve said to parliament ‘we don’t prioritise these things’?. They do.
“You can end up sometimes with First Class mail sitting there for two, three, four or five days which is unacceptable – especially given the price of First Class now.”
“Everything that they capture data on they want delivered, but with letters no-one knows how long it’s been sitting there because it’s not datemarked.
“Stuff that’s datemarked and they capture data on has to be prioritised – they say they don’t but they absolutely do.”
A third said: “They prioritise things: 24-hour tracking, then specials, then 48-hour tracked, then recorded internationals, then packages, then first class, second class and door-to-doors.”
A fourth said: “Things like door-to-doors and First Class mail, they will sack people on the charge of wilful delay, yet they’ll allow it to build up in the office for days. It’s ‘operational requirements’ when they do it.”
A fifth told The Herald: “If it’s a busy day, you would be expected to try and clear all Tracked 24 and 48-hour parcels and if you have to leave mail that’s considered fine.
“There’s no special priority for First Class mail over Second or any other mail really. You just try to manage that yourself so if you leave mail one day, you would try clear it the next and leave another bit if need be.”
Royal Mail said: “We treat all items the same, however we do have contingency plans that mean we may need to clear parcels from our delivery office first. This is only at exceptionally busy periods where it may be logistically necessary to do so.
“Parcels are large, take up far more space than letters, and their sheer number during busy periods (like Christmas) can block walkways, especially in our smaller delivery offices, and present a health and safety risk to colleagues.
“Removing them first allows all mail to keep moving, including letters, and is a necessary part of our contingency planning. These measures have been shared with Ofcom who have not identified any suggestion that Royal Mail senior management direct the prioritisation of parcels over letters outside of these recognised plans.”
Postal workers also said routes, which are decided centrally, were often too long and did not take into account specifics of the local area resulting in what one called “far too big and unachievable” routes.
Another said: “The spreadsheets and calculations they have are catch-all, which is fine if it’s an area where all the driveways are the same and all the doors are the same.
“If it’s a tenement having to climb up and down stairs, or you’re driving down a dirt road on an island, it’s not the same.
“They take a one-size-fits-all approach, ‘right the whole country is working this way now’ without a clue about how to do the bloody job.”
Another added: “You’ll get things like a flat 3/1 in a tenement building, and they have that down as a three-storey building when it’s four, and you might need to walk up 40 steps to go up one flight.”
A fourth said: “I know we just put letters through doors, but you have to learn areas and districts and the staff just aren’t getting the training – I know my district off by heart, but when you start throwing people into areas they don’t know that’s where the issues arise.”
Royal Mail said: “Decisions on these routes are influenced by mangers who work in those delivery offices so they certainly have a good picture of local factors. Being connected to the local community and understanding it’s challenges, such as difficult access roads, hills, valleys and the needs of local customers, is a vital part of how we make our deliveries.
“There are, at times, challenges facing recruitment at select delivery offices. This can often be due to low unemployment in a local area combined with a competitive labour market.”
