UK government completes privatisation of Royal Mail

The government has sold its final stake in British postal service company Royal mail at GBP4.55 per share, to raise GBP591m, it was reported on Tuesday.

Privatisation of Royal Mail was initiated in December 2013 and has now been completed with the sale of the government’s 13% stake in the business and a 1% stake awarded to Royal Mail employees.

Shares were sold in a process known as an “accelerated book build” to institutional investors only, with retail investors unable to buy stock. But around 143,000 Royal Mail staff will benefit from the 1% share gift, gaining 70 shares each at a value of approximately GBP318. As with previous share awards, Royal Mail staff will have to wait three years before they can cash their shares in. The employees of 500 year old postal service are now said to own around 12% 0f the company.

Royal Mail was floated at GBP3.30 per share and early this year the share stood at GBP5.26. Since January the share price has reportedly dropped to close at GBP4.712, as of 12 October 2015. In total, the government has received GBP3.3bn from the sale of Royal Mail shares to private investors, however a report commissioned by the then Business Secretary, Vince Cable, found that the initial sale was GBP180m less than could have been achieved. According to the report, high level of demand from banks and individuals meant that the shares could have been valued up to GBP0.30 more than the flotation price.

Commenting on the latest sale of Royal Mail shares, Business Secretary Sajid Javid said it was “a truly historic day for Royal Mail”.

Javid added “We have delivered on our promise to sell the government’s entire remaining stake, which means that for the very first time, the company is now wholly owned by its employees and private investors.”

Proceeds from the sale will be used by the government to pay down the UK’s national debt.

Modernisation continues at Royal Mail

Royal Mail is undergoing one of the most important change programmes undertaken in the UK. New delivery methods designed to enable Royal Mail employees to deal with the changes in the postal market – a decline in letters and an increase in packets – are being introduced. Significant reductions in the number of mail centres are also underway and around half of the 64 centres in 2010 could eventually close by 2016 or sooner.

Today, after more than nine months of consultation with the CWU under the 2010 Business Transformation agreement, Royal Mail is announcing its plan for rationalisation and investment in Greater London. With the number of postal items posted in London expected to more than halve between 2006 and 2014, it is imperative that Royal Mail continues the modernisation programme.

Following these consultations with the unions, it is likely that only five mail centres will be needed in Greater London. We expect the rationalisation of the mail centre estate to see the phased closure of the East London and South London mail centres to commence immediately. The mail centres remaining are: Croydon, Greenford, Jubilee (Feltham), Romford and Mount Pleasant. New accommodation is also being sought for the administrative and support staff based at Rathbone Place. The Greater London rationalisation programme is expected to achieve annual savings of £30 million.

Mount Pleasant is a large facility which needs significant investment to handle the postal volumes in London, including the change in the mix of items. Royal Mail expects to invest £69 million in Greater London as part of the UK-wide modernisation programme; of this, £32 million will be invested in Mount Pleasant. The latest automation equipment will be installed there; working conditions will be significantly improved.

Royal Mail would like to thank the CWU for its valuable input including a report produced by the union. Following the union’s input, East London mail centre will close six months later than originally planned. The company is also providing extended outplacement facilities for its employees in London, as discussed with the CWU. The consultation on the London mail centres commenced in early June. In November 2010, Roger Poole and Peter Harwood were asked to assist in bringing the review to a successful conclusion. Both Roger Poole and Peter Harwood had played a significant role in the 2010 Business Transformation agreement.

After much study and careful thought, Royal Mail believes it will not have to resort to compulsory redundancies to manage the reduction in the number of employees. With people demonstrating reasonable flexibility, Royal Mail expects that everyone who wants to remain in the business will be able to do so. As a result of the rationalisation programme, we expect the number of people employed in London will decline by approximately 751. The company has in place a well-developed programme to help its people to adjust to these changes.

Consultations with Unite/CMA will also begin shortly on reducing the number of Royal Mail operational line managers across the UK by up to 1,000 through voluntary means. This follows a separate review of managers in head office departments which will result in 1,700 people leaving the Group when this specific initiative concludes. The company has reduced the number of employees by around 65,000 since 2002.

Mark Higson, Managing Director of Operations and Modernisation, said: “Royal Mail’s modernisation programme, which is vital to ensuring a successful future for the letters and parcels business, depends on having the right number of people in our business as well as deploying the right technology and equipment.

“We are conscious of the impact today’s announcement will have on our staff in London. It is hard to reduce job numbers at any time; we are committed to doing everything we can, in line with our agreement with the union, to make these changes on a voluntary basis. We will be providing specialist outplacement advice to help our people affected by this announcement to look for new opportunities outside Royal Mail.”