Royal Mail tells unions to modernise or die: Loss-making firm wants to focus more on parcels and less on letters
Royal Mail has warned union bosses it will never make a profit again unless they back plans to modernise the business.
Chairman Keith Williams is spearheading a battle to turn around the 500-year-old postal service after coronavirus accelerated a shift away from letters to parcels.
In a trading update, the loss-making firm revealed it delivered 1.1bn fewer letters between April and the end of August than in the same period last year.
Last post: Royal Mail has warned union bosses it will never make a profit again unless they back plans to modernise the business
But its delivery vans took 177m more parcels to front doors as the lockdown sparked a boom in online shopping.
Shares soared by 25 per cent, or 43.7p, to 218.3p as the dramatic increase in parcel deliveries pushed up revenues by £139million.
Royal Mail now wants to focus more heavily on parcels and less on letters.
The shake-up also includes axing around 2,000 managers to lop £130million off its annual wage bill, as well as getting rid of ‘old, outdated ways of working’.
This includes introducing automatic clocking in and out for postal workers instead of handwritten sign-in sheets, and getting rid of old sorting machines.
Warning of a ‘material loss’ this year, Royal Mail said that the unit ‘will not become profitable without substantial business change’.
But it is struggling to secure the backing of its two unions – the Communication Workers Union (CWU), which represents frontline postal staff, and Unite, which represents management.
Royal Mail is in dispute with the CWU which has threatened a national strike over changes to working conditions.
This has plunged the group into crisis and contributed to the departure former chief executive Rico Back, who was ousted this year with a £1million pay-off.
Meanwhile Unite is battling plans to lay off around 2,000 of its 9,700 management staff. Royal Mail insisted that the discussions with the unions have made ‘good progress’, but a full agreement has still not been reached.
In a statement before its annual meeting with shareholders, which was yesterday, it said: ‘Too many parcels are sorted by hand and we are failing to adapt our business to fundamentally lower letter volumes and holding on to outdated working practices and a delivery structure that no longer meets customer needs.’
Royal Mail, which has axed its dividend for next year, added: ‘It is disappointing that we have not yet been able to reach agreement. Without these changes, we cannot achieve essential improvements.’
It also appealed to Ofcom and ministers to reform the obligation requiring it to deliver post anywhere in the country for the same price. It said the decline in the letters business means this is not financially sustainable.