MercoPress. South Atlantic News Agency

UK confirms plans to privatize the iconic postal service: tough battle ahead

The familiar red pillar boxes are protected by law

Britain’s coalition government has confirmed plans to privatize the country’s iconic 497-year-old state-owned postal service, Royal Mail, a move fiercely opposed by postal unions who have already suggested they will hold rolling strikes over the sell-off. The sale would be one of the most significant privatizations in Britain since the 1990s.

The Department for Business said a stock market flotation would take place in coming weeks, giving the public a chance to buy into the company. In the largest giveaway of any major UK privatization, 10% of the shares will go to 150,000 Royal Mail staff. Officials say the expected stock sale will be open to members of the public and larger institutional investors. The minimum investment will be set at £750.

The Conservative-Liberal Democrat coalition government said the size of the sale would depend on market conditions, although it intends to dispose of a majority stake. Analysts say the float could value Royal Mail at between £2-3 billion (3 to 4.7 billion dollars).

“These measures will help ensure the long-term sustainability of the six-days-a-week, one-price-goes anywhere universal postal service,” Business Secretary Vince Cable said, predicting a “healthy future” for the company.

But unions and the Labour opposition slammed the move. Ian Murray, business spokesman for the opposition Labour Party, accused the government of a “politically motivated fire sale.”

“The Royal Mail is a much-cherished national institution,” he told MPs in the House of Commons. “The case for privatization has not been met. With recent annual profits of over £400 million, we should be allowing it to flourish in the public sector.”

Deputy General Secretary Billy Hayes of the Communication Workers Union (CWU), said Royal Mail’s workers would not stand by and watch “people in the City and the board make a killing.”

He argued that the sale was not for the good of the company and would hurt workers’ pay and conditions, blaming “vested interests of government ministers' mates in the City.” In ominous words, he said that strike action looked “more likely than ever.”

Even as the announcement of the IPO was made, the CWU was planning to ballot workers for possible strike action. The union is opposed to the stock plan because of fears of potential job losses. Concerns rose that the threat of industrial action could damp demand for the stock.

The landmark privatization spells a major change for the long-established mail service. Its familiar red pillar boxes will be protected by law, but tampering with a service so central to public life is also a delicate matter.

However, the move does not have popular support. A YouGov poll, published in July, showed that 67% of the public oppose the sell-off, with only 20% in favour. The poll showed that Labour and Liberal Democrat supporters were strongly against privatization, while Conservative voters were also opposed, but less fiercely.

Royal Mail has revenue of over £9 billion and more than doubled operating profit in the year ended March 31 to £403 million pounds, helped by a greater focus on parcels, which make up almost half its turnover. In response to falling letter volumes, the firm has shed 50,000 jobs in the past decade and shut around 25 mail centres.

The iconic postal service can trace its history back to 1516, when King Henry VIII established a “Master of the Posts.” The service was first offered to the public by King Charles I in 1635. Interestingly, at that time, the recipient was the one who paid the postage costs, not the sender.