2023: Looking back at the Royal Mail fire sale
Looking back ten years to 2013 when the UK Government privatised the Royal Mail, we should have seen it coming. As predicted, prices immediately sky-rocketed after the sell off. The government promised that competition would hold prices down but, as soon as the private equity firms got control of Royal Mail, prices went up. Competition was maintained, every major courier company immediately hiked their prices in line with Royal Mail.
Two years after the sale, Royal Mail EU was incorporated in Luxembourg. The investors argued that all stamp sales were with Royal Mail EU. Royal Mail UK Ltd merely provided logistics services and paid royalties to Royal Mail EU, hence making massive losses. No corporation tax was ever paid for UK postal services to HMRC.
Along with the formation of Royal Mail EU and majority ownership by the French government, the monarch’s head ceased to grace UK stamps from the 1st of January 2016. The only people that were delighted were the anti-Monarchists and stamp sellers on eBay who saw their final sale prices triple for pre-2016 UK stamps.
Of course, we all believed the government that prices were controlled by law, but politicians only spoke of the price of a second class stamp being regulated by Ofcom. They didn’t tell us that all other prices were already deregulated and naturally the sparse profits Royal Mail made in the run up to privatisation didn’t satisfy the shareholders. Prices had to rise to pay for the investments which only the private sector could provide, they said.
Three years later Royal Mail was split into two, the lucrative parcels business – basically anything delivered in a van – was floated as a separate entity with the argument that Royal Mail could then concentrate on delivering the Universal Delivery Service. Remember when that was a six day a week service?
It was only a few years later that the Royal Mail went bust. Without the parcels business and with ever increasing competition from third parties using Royal Mail for the final mile, costs were rising and stamp sales were down. With the obligation to provide a six day a week service and inability to put up stamp prices, the Royal European Postal Service was launched.
With a stamp price of just €2 the new Royal EU Postal Service promised to deliver letters across the EU once every three days. Workers would be expected to work anywhere within the EU with a new harmonised wage structure. In reality posties couldn’t afford to work for the wages, so UK letters are now delivered by EU workers. Sadly it’s a hit and miss experience as many mail delivery workers don’t actually speak English.
What’s being said about the Royal Mail sell off
I just made the history above up – no one really knows what will happen when the Royal Mail is sold off. What’s being said however is:
- The government price promise only refers to a 2nd class stamp. Almost all other prices and services are deregulated and can be increased at will.
- Investors will be greedier than the government. They’ll want a “reasonable” return on their investments and that can only mean price increases.
- Privatisation solves nothing. The Royal Mail will have the same modernisation programme in place after the sell off as it already has.
- The Royal Mail has sometimes made a loss and sometimes been profitable. In the last two years Royal Mail has made a modest profit for the country (£440m in 2013).
- Royal Mail will still cost the tax payer money – the government are only selling off the profitable bits, and will still have responsibility for pensions, and the parts that make a loss
- The government says Royal Mail needs access to private investment to flourish and that’s why it must be sold off. That’s a lie, there are many Private Finance Initiatives (PFI) in the UK. Hospitals, Prisons, Roads and Schools have all been built with Public Private Partnerships so why not the new Royal Mail processing facilities?
- Most important of all – does it matter if Royal Mail sometimes makes a loss? It greases the wheels of the most advanced ecommerce infrastructure anywhere in the world. Ecommerce is the only part of the economy to see double digit growth throughout the recession. Ecommerce needs Royal Mail and if that sometimes needs support from the tax payer isn’t it a price worth paying?
The truth of the Royal Mail sell off – Facts from Royal Mail
Access to External Capital
Many previously Government-owned companies – Rolls Royce, BP, etc. – have flourished under private ownership. The Government has said it is not 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. Some of our competitors are successful, privately-owned global players – which invest when they need to. Like them, we need to access to capital from time to time, but the Government has made clear it doesn’t have the money to allocate to Royal Mail ahead of schools and hospitals. Access to the capital markets will allow us to be more nimble to seize the opportunities available to us.
Royal Mail operates in a competitive market that will constrain its ability to raise prices. The parcels market is highly competitive. Letters volumes are in severe decline and are very sensitive to price rises. Ofcom, our new regulator, said last year that Royal Mail needs “to materially increase prices in order to support the sustainability of the universal service.” Ofcom has retained a safeguard price cap on 2nd class stamped services up to 2kg as a further constraint on postage prices.
Royal Mail is honoured to provide the six-day-a-week, one-price-goes anywhere Universal Service to over 29 million addresses in the UK. There is a clear and unambiguous legal commitment around the Universal Service. It 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.
Quality of service
Quality of Service is one of the key drivers of our success. The Quality of Service regime that applies to Royal Mail under public ownership will continue to apply under private ownership. The regulator for UK postal services, Ofcom, has already specified the minimum standards. Our customer service will be an advantage for us in the private sector.
The Government’s main stated reason for privatising the Post Office is that it needs great investment which can only come from the private sector . The NHS is now run by NHS Foundation Trusts. These Trusts can borrow money privately to invest in their infrastructures and for new services. Why can’t the same be done for the Post Office? Even Mrs Thatcher decided not to privatise the Post Office. P.S. I guess you would vote to leave the EU then?
I’m not so sure leaving the EU would be a great idea… but I’m not half glad we kept the good old £
Roger Browne The post office and Royal Mail are two completely separate entities. They want to privatise Royal Mail only
we don’t care if Osama bin ladan and gaddafi return from the grave to run the royal mail
as long as its reliable
We couldn’t care less who owns RM as long as the service is reliable and priced sensibly.
All Tamebay posts should be written like this
The only bit I think I may be wrong on is the monarch’s head being removed from stamps.
It’s much more likely Deutche Post will grab a share of Royal Mail, roll the two companies into Royal Deutche Post and use the Queen for marketing postal services across the whole of the EU.
TNT Post will probably grab a slice of the pie too, so we’ll see TNT stamps bearing the Queen’s head. The marketing opportunities are immense (and regardless what steps the government say they’re putting in place to prevent it, they’ll be watered down over time… trust me, it always happens!)
Won’t the TNT post stamps have a picture of the King/Queen of the Netherlands, rather than that of the UK.
Much more likely it will have the head of the Unelected European Government consisting of Third Rate Bureaucrats. The subjects on the stamps will be the “glories” of the EU State with images of Rome, Paris, London etc all looking the same. Or even glorifying the Mafia Ruled EU.
My observation is that EU bureaucrats are generally of a higher calibre than most of the second rate ones you will find at Westminster as it happens.
I presume from your extensive knowledge of parish pump politics you are an expert on EU affairs and please do point out where these Mafia rulers are to be found.
You don’t even understand how the EU is governed either.
Your ignorance on this as with most other subjects is, as ever, simply stunning.
God Bless ‘fools’.
Yes I am a Parish Councillor. But in the past I have been an elected Member of the Party National Executive and been a Parliamentary Candidate etc. So perhaps I have more than served my Apprenticeship…Have You???
In regard to the influence of the Mafia on EU Politics and in fact Economy don’t you even watch the EU?? If you did you would realise that even the EU is not happy with the effects that the Mafia has on the EU. Perhaps you are the one who is all ignorance.
Do you know what.
George Orwell,Isaac Asimov e.t.c…….
They were so ahead of their time,how the hell did they know.
I used to read this stuff religiously in the 70,s.
Now Chris Dawson LOL 🙂
I am so happy to be nearly of “THAT AGE”
I am concerned for our future generation as i am sure previous ones were concerned for us,but i think this time it,s serious!!!!
C’est La Vie’
if me grannie had balls she would have been my grandad,
who knows in the future there may be no royal mail at all everything may be teleported
Ah….. I remember that time so well .
I sold lots on the internet at that time & made a few extra bob too.
I bought some RM shares and sat on them till I made a good few bob more & then sold them on.
Cheerfully retired now & not having to worry about; INRs…SNADs….DSRs…arrogant customers who cannot write with capital letters…etc.
RM today  well what’s it all about….The polish run the ground force. The management don’t know where a postcode is. All the sorting offices are closed & are now luxury flats. No more red vans, just self employed drivers [like UKMail drivers were in 2013].
PS; Just living in sunny Spain….. with loads a money