Royal Mail Privatisation: Government Announces Next Move In Sell-Off

Royal Mail postboxes outside a Post Office near Covent Garden, London.
Royal Mail postboxes outside a Post Office near Covent Garden, London.

The government is to start tendering in the next few days for a syndicate of banks to advise on a possible flotation of the Royal Mail.

Business Minister Michael Fallon announced the move as he voiced hopes that global advisers on a sell-off will be appointed at the end of May.

Mr Fallon said ministers did not want to be tied to a specific type of sale or deadline for the sell-off, adding that the government was attracted to an Initial Public Offering (IPO) as the preferred option.

In a speech to the Policy Exchange, he said all options for the privatisation remained on the table, and no final decisions have been made.

Mr Fallon said he will continue to encourage the Communication Workers Union (CWU) to hold talks over the structure of an employee share scheme.

The union is opposed to the sell-off, warning that jobs, terms and conditions and services will suffer, especially deliveries to rural areas.

Mr Fallon said: "Unless Royal Mail has the capability in the future to access equity markets, every £1 that it borrows is another £1 on the national debt.

"That means growing the national debt. No responsible party could propose that in the current environment or for that matter in any environment when Royal Mail, run on a fully commercial basis, has the capacity to be cash generative, profitable and perfectly able to raise the capital it needs from the private sector.

"A change of ownership in Royal Mail will not mean that Royal Mail can stop delivering to rural areas. Royal Mail will remain the UK's designated universal postal service provider and must continue to provide a six day-a-week service throughout the UK."

Mr Fallon said the government will make a commercial decision, not one based on ideology.

Mario Dunn, campaign director of the Save Our Royal Mail group said: "The minister has fired the starting pistol on the sale of Royal Mail.

"Yet customers are none the wiser about who is going to end up controlling the business and whether the taxpayer will get genuine value for money out of the sale.

"It is certain, however, that without the proper protections in place, many will lose out, particularly small businesses and people in rural areas. While the bankers make millions from the sale, it is the hard-pressed customer who must foot the bill."

Alexander Ehmann, head of regulation at the Institute of Directors (IoD), said: "Michael Fallon is to be applauded for driving forward the privatisation of the Royal Mail. The previous Labour Government recognised the need for change, but they lost their nerve."

"Privatisation will allow the company to access the private finance it needs to invest and improve its service to customers. The experiences of countries such as Austria and Germany show us that private sector postal services can work well for their customers while delivering sustainable jobs and profits.

"The Government's Royal Mail reforms must be seen through and have the IoD's full support."