Why Royal Mail should be privatised

Nick LandonWe’ve been following both sides of the Royal Mail privatisation argument with interest. Those against have been pretty vocal in their arguments and today Nick Landon, Managing Director of Royal Mail Parcels, has kindly agreed to give us a different perspective and argues in favour of privatisation:

The recent announcement by the Government that it will soon be offering shares to both investors and our employees is truly an important step for us. It is also important for our customers, both individuals and businesses.

We have made significant strides in becoming a successful commercial company in recent years. Last year, in contrast to three years ago, we reported profits in our core UK business rather than losses and we generated cash rather than having to borrow. The transformation of Royal Mail is underway; but it’s by no means complete.

To understand why now is the right time for Royal Mail to move into private ownership, it is important to understand the way the postal market has changed. While letter volumes are in decline, Britain’s online retailing boom is driving strong growth in the parcels market. Around half of Royal Mail’s revenues now come from our expanding UK and international parcels businesses. Alongside this, many of our competitors are successful, privately-owned global players who have been able to invest to modernise their operations and capture growth in high-growth markets such as parcels.

The Government has acknowledged it has not been a good owner of large businesses. Private ownership will enable Royal Mail to become more flexible and fleet of foot in the fiercely competitive markets in which we operate and seize the opportunities available to us. We will have access to long-term capital to invest in our business when we need it. The Government has made clear it doesn’t have the money to allocate to Royal Mail ahead of schools and hospitals.

I have heard some people say that the service we provide small businesses will reduce. Royal Mail is very proud to provide the Universal Service and of the role we play in the economy. We make commerce happen by connecting companies, customers and communities across the UK. I want to assure our customers that the six-day-a-week, one-price-goes-anywhere, affordable universal postal service will remain unchanged. The Universal Service is protected by law – enshrined in the Postal Services Act 2011. Any change would have to be passed through an affirmative vote in both Houses of Parliament.

We believe we can combine the best of the public and private sectors. Our customer service will be a competitive advantage in the private sector. The Quality of Service regime that applies to Royal Mail under public ownership will continue to apply under private ownership. Ofcom has already specified the minimum standards under regulation.

Royal Mail will continue to offer good value for money. UK stamp prices are among the best value in the EU. Affordable prices are protected in legislation and regulation.

Our people are at the heart of Royal Mail. The current position is that all terms and conditions that apply to Royal Mail employees now would remain in place, on the same basis, were the company sold. To provide further reassurance, we will create a legally-binding and enforceable contract with the Communication Workers Union. Pay and protections could not be changed for the period of the contract without CWU agreement.

In addition, approximately 150,000 eligible UK employees will receive free shares giving them a combined 10 per cent stake in the business. This is the largest free stake of any major UK privatisation for nearly 30 years.

Many previously Government-owned companies have flourished under private ownership. We believe privatisation will equip Royal Mail for similar success.