Britain to privatise majority of Royal Mail

10th July 2013, Comments 0 comments

Britain's government on Wednesday announced plans to privatise more than half of Royal Mail, the state-run postal delivery service, following a major restructuring in recent years triggered by a surge in email use.

Business Secretary Vince Cable told parliament that the coalition government planned to "dispose of a majority stake", which would include 10 percent of the company being handed to employees in the form of free shares.

Cable, a member of the Liberal Democrats which share power with Prime Minister David Cameron's Conservatives, said the government would seek to hold an initial public offering (IPO) for Royal Mail shares by the end of the current financial year that ends next March.

"This is logical, it is a commercial decision designed to put Royal Mail's future onto a long term sustainable basis," Cable told parliament.

"It is consistent with developments elsewhere in Europe where privatised operators in Austria, Germany and Belgium produce profit margins far higher than the Royal Mail but have continued to provide high quality and expanding services."

The Communication Workers Union (CWU) on Wednesday said it would ballot members over strike action unless a legally binding deal on employee terms and conditions could be agreed with any potential new owner.

"I really do not understand what the government are trying to achieve by this," said CWU deputy leader Dave Ward.

"If you think about the profits the Royal Mail are now making, there's no need for it to be privatised. What privatisation will do is destroy the UK's universal postal service.

"There's no way private companies can maintain six-day-a-week deliveries to every single address in the UK," he added.

But Cable told parliament: "The government has decided to proceed with a flotation of Royal Mail with shares on the London Stock Exchange via an initial public offering."

Reports suggest that the government plans to keep a 49-percent stake.

Royal Mail has recently enjoyed a surge in annual profits thanks to the increasing popularity of online shopping which generates parcel traffic, and owing also to deep cost-cutting and big increases in stamp prices.

Media reports say the part sale of Royal Mail could worth up to £3.0 billion ($4.5 billion, 3.5 billion euros). The government previously said that it intends to take on Royal Mail's pension fund, including its hefty deficit.

The Conservative-Liberal Democrat government relaunched plans to part-privatise Royal Mail three years ago and after the proposal was ditched by the former Labour administration.

Former prime minister Gordon Brown's Labour government scrapped the sell-off plans in 2009 as Britain struggled with recession following the global financial crisis.

But Royal Mail recently announced that its profit after tax soared to £566 million in 2012-13 compared with a net gain of £149 million during its previous financial year. Revenue grew almost 6.0 percent to £9.279 billion.

Royal Mail continues to operate most British postal services even though its more than 350-year-long monopoly of the letter-delivery business ended in 2006 as new rules kicked in to allow rival operators to win a slice of the market.

© 2013 AFP

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