08/07/2013 10:58 BST | Updated 09/07/2013 04:41 BST

Royal Mail Privatisation: Business Department Risks 'Chaos' In Announcement Of £3bn Move

The government's plan to take the Royal Mail into private ownership is expected to be revealed this week, with critics warning the process could cause "complete chaos" for the UK's postal service.

Business minister Michael Fallon is set to tell MPs how the state-owned delivery service would be listed on the London Stock Exchange in an initial valuation (IPO) of up to £3bn in an announcement that could come on Wednesday, according to Sky News.

The government has courted controversy with its plans to sell Royal Mail. Business Secretary Vince Cable said that the organisation had "no alternative" but to seek private investment.

Postal workers have rallied against the move. Despite potentially being in line for £1,500 each, 96% of postal workers in the Communication Workers Union (CWU) voted against privatisation in June.

Labour's postal services spokesman Ian Murray warned that privatising the Royal Mail would lead to a "cherry picking" of regional services. "The government is rushing this through in a fire sale to meet the demands of the Treasury," he told the Huffington Post UK.

"Their handling [of the sale] has been pretty dreadful. They're rushing it through as quickly as possible because they want the money for the next budget."

"The minister responsible [Michael Fallon] has even threatened workers that if they don't back a sale, they'll find a foreign owner, which I think is pretty distasteful."

The business department refused to clarify on what day the announcement would be made. Sources played down suggestions that the government would be "firing the starting gun" on the delivery service's sale. "It'll be an update on our intention to float and the final decision on the form of sales", one said.


The government looks to be considering a "preferred route" of injecting capital into Royal Mail through a stock market flotation, however more specific details would look to remain unclear. Critics have questioned whether Royal Mail needs to be privatised after posting profits of £440m in 2012. "Royal Mail is capable of looking after itself," Mario Dunn, from the Save Our Royal Mail campaign, told the Huffington Post UK.

"They've nationalized the debt and they want to privatize the profit. Not even Thatcher wanted to privatize it, she never wanted to do that," he added. "There's room for complete chaos in the privatisation process."

The privatisation could end up crippling the standard of postal service for UK households in rural areas, according to Dunn. "They'll see a lot of change", he said.

The Royal Mail enjoyed pre-tax profits of £324m in 2012, up from £201m a year earlier. The group was propped up by increased sales in first class stamps, which increased in price to 60p, as group sales soared by more than £500m to £9.3bn. Nearly half of the service’s revenue (48%) comes from the parcel service, which is seeing increased business, with 1.4bn being delivered last year.

However, Royal Mail chief executive Moya Greene said the letters delivery service was in "structural decline" as the number of letters being sent every day has slipped to 58m, compared to 63m in 2011-2012. The group's parcels and letters delivery unit posted an operating profit of £294m.