THE BLOG

A Good Day for Bankers, a Bad Day for Customers

12/09/2013 13:58 BST | Updated 12/11/2013 10:12 GMT

This is a good day for city bankers and share dealers but a bad day for Royal Mail's customers. People in rural areas, small businesses and the elderly are all particularly vulnerable to what will be the inevitable price rises and rural service reductions.

Privatising Royal Mail fires the starting gun on the race to end the universal postal service as we know it. A privately owned Royal Mail will not want to maintain loss making rural deliveries. Once the new owners of Royal Mail, armed with a new obligation to maximise shareholder returns, look at the areas of the business that lose money, they will want to act.

Working with the regulator, Ofcom, which has a duty to ensure the universal service is self financing, Royal Mail will put pressure on Ministers to allow it to compete on a "level playing field". Because the already existing private carriers cannot be compelled to deliver everywhere for a single price then Royal Mail will argue that it should not be financially disadvantaged from doing so.

The inevitable consequence will be reductions in rural postal deliveries. They will go from six to five to four then three days a week. Ultimately people in rural areas will be asked to collect their post from their nearest large supermarket chain.

Eventually people in rural areas will find their local post office has shut. Royal Mail, in the drive for extra profits, will look to alternative outlets for its goods and services with the supermarket sector offering national scale. Small post offices that barely survive will find any loss of income from Royal Mail too much to bear and will close.

Small businesses will also suffer. The internet has given rise to thousands of entrepreneurs who offer goods and services online. A cheap and efficient postal service is an essential element of their fulfillment processes. Royal Mail's strong position in the small parcels and packets market will enable it to increase prices significantly. Such price increases will wipe out the margins of thousands of small businesses. It is a pity the Federation of Small Businesses has decided to ignore this potentially invidious attack on their members.

Removing political control of Royal Mail will also herald the inevitable orgy of massive pay rises, bonuses and share options for senior directors. Buying houses will seem passé when large yachts are now on offer to senior Royal Mail managers. But of course they will not be Royal Mail managers for that much longer. The inevitable rebranding will see Royal Mail's name changed to Consignia (or something equally modern) "keep up with the competition".