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Royal Mail – The aftermath of privatisation

By Chris Dawson October 16, 2013 - 6:57 am

Royal Mail Share PriceThe Royal Mail has been sold, the share price has rocketed and hopefully a few Tamebay readers are good capitalists and have cashed in. Now we’re ready for the Post Mortem.

Royal Mail’s share price jumped from the offer price of £3.30 to £4.89 at the close of business on the first day of open trading. 100 million shares (about 10% of Royal Mail) were traded within an hour of the Stock Market opening.

The House of Commons Business Select Committee are getting ready to grill Lazard (the investment bank who were asked to review Royal Mail’s offer price in the last two weeks) along with Vince Cable the Business Secretary, with concerns the sale price was too low. They want to know if the country lost on out a potential billion pounds.

And a billion quid is still a billion quid. To put it into perspective, the Winter Fuel allowance for pensioners costs the country about £2.1 billion per year. Half of that could have been paid by pricing Royal Mail a bit higher and shareholders would still have seen a nice bump on flotation day.

Moya Greene, Royal Mail’s CEO is already calling for more “protection” for the company with the expectation that the CWU will have a mandate for strikes. We’re expecting the CWU to make an announcement some time Wednesday morning. She said “We need to start thinking about what sort of protections do we need as a company from our people, from what has been probably too quick an approach to resort to industrial action“.

The only thing that’s not too clear is who Moya is calling to provide the “protection”. Royal Mail is no longer a 497 year old government institution, it’s now a 1 day old company owned by it’s shareholders. It is of course not impossible to have a great working relationship with the Unions, just look at Tesco with 472,000 staff (three times as many as Royal Mail) and the great relationship they have with USDAW (Union of Shop, Distributive and Allied Workers). Tesco staff don’t go on strike too often.

Dave Ward, CWU deputy general secretary, said of the sale “The Royal Mail share price has soared further today, bringing more proof that the company was undervalued by the government’s city mates. The taxpayer has lost over £1 billion already in this bungled fire sale of a cherished national institution. Postal workers cannot trade their shares for three years and they are far more concerned about their jobs than the share price“.

The Union want to secure a deal on protecting jobs, services and terms and conditions in the company. In a meeting of postal workers on Tuesday they said “The privatisation battle is over – but the war to protect pay, jobs, terms and conditions is on“.

Let’s be honest, Posties are in the main hard working and deliver a fantastic service come rain, sun or snow. They’re out in all weathers and whilst we may grumble about the odd missing parcel, ecommerce wouldn’t be the same without out postal service. Sure, they’ve been gifted with £2200 worth of shares each, but unlike the general public they can’t cash them in for years.

Posties just want to know that their jobs are safe and that they won’t have ever increasing workloads and won’t get hit in the pocket with pay and overtime cuts. None of that, in the face of it, is an unreasonable request. Now it’s up to Moya Greene to make peace with the unions before everyone’s Christmas is ruined.

  • Gary
    3 years ago

    If Royal Mail is a growth business then surely jobs are secure. It is pretty much a job for life at Tesco if you want it. Why cannot this be the case at Royal Mail if the business is managed properly?

    Strikes will only add to any insecurity that is felt so what is to be gained if this is the reason for the action. Modernisation does not always have to mean job losses. It can mean more parcel and package logistics work in what is perceived as being a fast growing sector.

    • 3 years ago

      If they do vote for strikes then the country could have saved another third of a billion quid and sold more shares instead of giving 10% to the workforce….

      ….after all they only did it to give a sense of “ownership” and “all in it together”. Be a shame if their bribe didn’t work

      (Not that I begrudge the Posties their shares which will probably mean many of them have to fill out a tax return for the first time ever with no prospect of cashing in while times are tough. They probably don’t have a view of their finance 3-5 years into the future but they do know they’ll still want a job)

  • davelovesebay
    3 years ago

    Everyones forgetting the dividend. I feel many long terms invester may have piled into the stock due to the dividend being at 6.1 % which is massive compared to what youd get else where.

    Now the stocks up 50% thou. The dividend will also be 50% lower.

  • Hereford United fan
    3 years ago

    Just think, if we started delivering mail by horse and cart again we could employ loads of extra postmen.

    They have got to accept that times are changing. I have been made redundant twice due to takeovers. That I just the way modern life works.

    Going on strike will simply result in more business going else where and more jobs being lost.

  • Gary
    3 years ago

    Royal Mail 24 hour strike date declared as Monday 4th November. 4 to 1 in favour.

  • Hereford United fan
    3 years ago

    My postman has just told me. I spoke to him very briefly. He is lucky I did not punch him. What an absolute twat he is. He must have a brain the size of a pea.

  • Gary
    3 years ago

    Rumour is redundancy payments will be in the range £30k to £100k for most postmen with more than 10 years service. This is what the union should be negotiating for its members not job security. Posties will be queuing up to leave if these figures are accurate so what is the problem and why take it out on customers?

    I also have taken redundancy twice for reasons not of my own making with a nice lump sum and the first time walked into another job. Second time set up a business selling on ebay (and a website) and that was 13 years ago and still doing it!

  • Mary D
    3 years ago

    Is the universal service going to continue? If not The Queen says the title “Royal” will go.

    • dan
      3 years ago

      i think the universal service is protected by law / legislation, and was one of the conditions of sale.

  • Gerry007
    3 years ago

    .
    Personally I do not think it was undersold.
    Any investor wants to see a price where a profit is to be made.
    There would be no point [long or short term] if you pay £3.30 and it’s worth £3.30 a week later.
    A share price of £5 or less makes it about right.
    The yearly profit is what will make the difference.

    The staff need to understand now, they are part owners, not a Government/nationalised organization so there actions to strike will effect them too.
    When & if the strikes go ahead, the share price will drop, then they will be counting their losses.

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