FOUR days ago, an e-mail flashed up on Lancashire small businessman Paul
Farquhar’s computer screen. It was the news he had been dreading. Vital
blood tests sent to a laboratory in Glasgow had been ruined because of
delays in the post.
Like tens of thousands of enterprises across Britain, Farquhar’s company,
Healthy and Essential, a supplier of food supplements and other medical
services, has been plunged into crisis by the worst postal strike in 20
years.
Farquhar believes he can ride out the storm, but others may be less fortunate.
A series of strikes by the Communication Workers Union (CWU) has crippled
the postal system, leaving a backlog of about 100m letters and parcels.
At stake is the future of Royal Mail as it struggles to transform itself from
a Victorian relic – and its long-held role as an arm of the nanny state –
into a modern delivery company.
Royal Mail has seen commercial rivals eat into its market since it lost its
monopoly over postal services at the start of 2006. Courier firms gained a
licence to collect and distribute letters, handing them over to Royal Mail
for delivery on the last – and most costly – leg of the journey to the
letterbox.
Some rivals such as UK Mail, owned by Business Post, which collect mail but
use the Royal Mail’s postmen and postwomen to deliver letters and packages
the “final mile” to customers, have been hurt by the strikes. But companies
offering “end-to-end” deliveries of packages have cleaned up.
So can Royal Mail modernise and survive? According to one insider, this great
British institution, which handles an average of 84m letters and parcels
each day, has reached a “tipping point”. “This is the key battle which was
always going to happen. This is it. It is crucial that people understand
this.”
The dispute has been over pay, pensions, job cuts and – most importantly –
working practices. Royal Mail’s management, led by chief executive Adam
Crozier and chairman Allan Leighton, have been desperately trying to
modernise the business and stamp out so-called “Spanish practices” (see
panel). But their plans have met stiff opposition from the CWU and its
combative deputy general secretary Dave Ward, who allege that 40,000 jobs
could be axed.
This is a battle that Royal Mail cannot afford to lose. Crozier argues that it
simply “wants our people to work the hours [37 hours and 20 minutes a week]
they are already paid to do”.
Though he and Leighton have managed to pull the business out of a £938m
crippling loss in 2002 to an operating profit of about £100m, Royal Mail
desperately needs to modernise to compete. Rivals such as TNT, the Dutch
postal group, and Deut-sche Post, are 40% more efficient and pay their
workers around 25% less.
Royal Mail has secured a £1.2 billion loan from the government to invest in
new systems, but for this to be implemented effectively it will need to
introduce the more flexible working practices that the union has been
resisting.
Last week the dispute intensified after Ward accused Royal Mail of “slavery” –
a claim Crozier dismissed as “cobblers”.
On Friday, Royal Mail won an emergency injunction to block official strikes
tomorrow and Tuesday after a judge agreed that they were illegal. Then came
better news: hours of talks between the two sides ended with a joint
statement saying the CWU will meet tomorrow to discuss “the agreed terms in
all the issues in the dispute”.
A deal looks to have been reached, but the postal giant’s reputation has been
severely damaged by the strike. “Every day the dispute continues, it harms
Royal Mail, harms the workforce and harms its customers. There are no
winners,” said Howard Webber, chief executive of customer group Postwatch.
Some observers estimate that Royal Mail has already lost up to £260m in
revenues. Confidence in it is ebbing away.
For some customers, especially smaller businesses, there is no choice but to
use Royal Mail. The £15 cost of using a courier service to deliver a letter
or small package is too expensive compared with a 35p first-class stamp. But
courier firms are rubbing their hands. Business Post’s parcel volumes jumped
10% on October 4, the first day of the strike. DX has seen a 25% rise in
business, adding more than £10m in revenues.
The Department for Work and Pensions used a courier firm to send out 400,000
pension cheques normally sent by post. Many believe Royal Mail will struggle
to recover lost business.
“Anyone who can move to an alternative, will. This strike has thrown the
direct-marketing industry into crisis. If Royal Mail thinks it can win back
customers it is making a very, very big assumption,” said Robert Keitch, a
spokesman for the Direct Marketing Association.
Even before the strike, Royal Mail was being squeezed. Since 2006, it has lost
40% of the lucrative bulk-mail business as well as key contracts with
Amazon, HSBC and Abbey. Its direct-mar-keting business has slipped to 88% of
the level it was at three years ago. In unaddressed junk mail, rivals have
left Royal Mail with just 25% of market share.
Though Royal Mail has a stran-glehold over addressed letters, delivering 99%
of the volume of the UK postal market, its obligation to provide a universal
service throughout the country is a burden. Under its complex access
agreement with rivals, it loses around 5p-6p per item it delivers.
Price regulations do not help. Under one measure, Royal Mail must keep a fixed
margin between the retail price it charges a customer and the wholesale cost
paid by rivals to access its network. If it cuts the retail price, rivals
competing for a contract also benefit. In effect, it subsidises competitors.
Big rivals could now decide to compete with Royal Mail on a larger scale.
Spurred on by the strike chaos, TNT is considering launching its own
end-to-end service, bypassing Royal Mail.
The strike could also accelerate a structural shift in the market. Mail
deliveries are shrinking by 2.5% a year and this trend could increase if
more companies and consumers turn to electronic alternatives.
Last week alone, 20,000 British Gas customers signed up to receive their bills
electronically.
The company wants 25% of its customers to do so by 2010.
“In the medium to long term, Royal Mail’s position looks increasingly
precarious,” said David Stubbs, a postal systems expert at consultants
Europe Economics. “When a comprehensive electronic e-mail database emerges
there is little they can do – the post can be bypassed.”
Other former state-owned public services have successfully reinvented
themselves commercially. The Royal Mail is in danger of simply withering
away.
UNION STAMP
THE origins of the term ‘Spanish practices’ are murky. Some argue it emerged
after the Spanish inquisition, others say it is based on an age-old British
delight in abusing the Spanish.
Whatever the true origins, Royal Mail claims Spanish practices are rife and
include: Workers signing in and out of a shift on arrival, leaving no
record of actual hours worked; Workers claiming additional ‘meal and grace
breaks’; Staff getting paid for two to three hours’ overtime even if only
30 minutes is worked; Overtime payments at Christmas even if no extra
hours are worked; No flexibility in the sorting office; No
‘cross-functional working’ – workers unloading trucks are barred from moving
mail round sorting centres.
Why do you make it impossible to find out when the last posting in dates are for Christmas cards for abroad??
Please let me know when and where this information will be published on line.
Bob Marsland, Bristol, England
Unfortunately, the privatisation of essential services has had a detrimental effect on this country. Freedom of choice has become confusing, just look at the different options available for landline telephone services and energy supplies, not to mention the mess public transport is in.
The Them & Us attitude between union and management is an archaic hangover from the old days of The Post Office, and it is thier inability to reach agreement which is destroying the postal service, instead they should be working together to provide a service of excellence. i hope this case is settled soon, and the union luddites and management autocrates get back to doing what tey are meant to do - provide a public service!
Ron Murch, milton Keynes, Bucks
I have told my customers to order by email and they will be invoiced the same way. Payments will be made by BACS. I do not want to send or receive Xmas cards so the Royal Mail can get stuffed.
Bob, Cowes, UK
Recently in Poland, doctors at a hospital were on strike: The patients in response have gone on hunger strike with the ultimatum to the doctors: either resign or get back to work. We should perhaps apply the same ultimatum to our postal workers: if you don't like it - find another job. If it isn't really that bad, then get back to work.
Marco, uk, uk
We should have done with Royal Mail, which should now be renaming Royal Pain. Lets open up the market to free competition and let the market decide a fair price and a fair market wage. Other European countries do it without problem, so why don't we? If you live away from infrastructure, then that is your choice and you should pay more for it.
As for the unions, if I was Adam Crozier, I would unilaterally decide not to recognise them and begin recruitment of non-union staff with immediate effect.
Sanjay, London, UK
Why don't the Government come out and admit they want to privatise Royal Mail,get it over and done with instead of letting it die a long and painful death to the point where somebody will come and buy it off them?
But oh no,that would upset the public since when did a Labour(New) Government privatise things.
Well that's what's happening -privatisation by stealth.
Thery're letting Royal Management and the CWU fight to the death so the Government won't be blamed for the death of Royal Mail.
But in my eyes they're totally to blame for everything to do with Royal Mail.
So all these people who complain about the service-blame the Government not the Postal Workers.
john, shrewsbury, uk
as a outsider who's wife has worked for royal mail for 27 years
the press need to investigate the millions of £s in lost invenstment abroad by the so called leaders of royal mail, who authorised these poor investments of public money,
also the bonuses crozier and Leighton and their imeadiate management team are due to pick up, they can afford to tell people they are not having a annual pay rise,
Also the way mr crozier left the FA reflects in the way the royal mail is going out of control!!! he has not got a good track record.
Postcomm are doing more damage by not allowing royal mail to compete and putting restrictions on pricing , this must be in breach of the block exemption directive retriction of trade.
Not many people know that the competitors use Royal Mail to deliver letters they have charged their customers a premium rate for and could have had the same letter delivered for a lot less. again post comm should not be retricting the business.
dave, staffordshire,
In the opinion of many people it is Crozier and the politicians who are destroying Royal Mail. They are hoping to hand it over to big business interests who can scrap the non-profitable parts and charge through the nose for the profitable sections. That way they can then award themselves huge bonuses and massive shareholder dividends. In the meantime, just as has happened on the Railways, we the public will end up paying exorbitant amounts of money for an appalling service. One wonders why all other European countries manage to provide an excellent postal service - I refer to France, Belgium, Germany and Spain, which I know first hand.
Neil, Gloucestershire, England
What you have to remember is that Mr Leighton chose to tottaly change the postal service when he arrived and with this he ceased the 2nd delivery but in doing so he offered the staff an incentive, which was to take on extra work and make the rounds larger and only cover the ground once . This was accepted and he told the workforce that it would be a case of job and finish. Also it has been mentioned that spanish practices are in force i.e being paid 3 hours for doing extra deliveries and getting it done in 30 minutes, this total garbage as Royal Mail has spent millions of pounds on computer programs that tell them how long it takes to do each and every house, flat office on ones delivery, this is then fed into the programme and the delivery timescale is formed. But the 3 hrs that is paid is only the time for delivering the mail not prepartion or sorting time. Under the new flexability terms they wish to introduce this means that sickness and holidays should be done with no extra pay.
karlee, London, uk
As I see it, it is the Government and postcomm that are destroying Royal Mail.
They opened up the mail system to competition, fair enough but is it a level playing field?
If we think of Royal mail as 2 halves, the business mail and the domestic mail.
The business mail is where the profit comes from and the domestic mail is where the losses come from.
You try and get a courier company to take a letter across the country and it will be a hell of a lot more than 32p.
So what do the likes of TNT and UK MAIL do?
They concentrate on the business post and anything that costs them too much to deliver they get Royal mail posties to deliver at a loss.(brilliant postcomm)
The likes of TNT and UK MAIL don’t want to deliver domestic mail because there is no profit in it and you will never see them walking the streets.
Postcomm dictates what Royal mail can and can’t do and says it must deliver to every house in the UK for the same price.
If postcomm lifted their restrictions, ROYAL MAIL could compete on a level playing field.
But the consequence of that would be a loss of service, domestic mail prices would go up, and the further you want to post an item would cost more, a lot more.
The question is should domestic mail be a service or a profit making business?
Karen Ward, Leeds,
Royal Mail workers will lose all support from both the public and business users. One week was bad enough!
I run a small business, and rely on the postal service for invoicing and proofing to clients. Although I am fairly lucky in that proofs are sent via courier the lack of payment from clients has been hard, almost crippling.
SME's will suffer from this, but you must also think of the pensions. I am very grateful that I tend not to recommend Direct Mail Marketing due to the large cost, poor service and minimal return.
In conclusion, Royal mail have no support from me, and I look forward to the likes of TNT, etc providing a better service even if it is a little more!
James Blackwood, Ryde, Isle of Wight
the postmen and women do a great job , in my eye's it is still a public servce , the police force lose loads of money each year , why not sell them off to private companys , it will never happen , we can all see that the two in charge at the top and our great goverment want to run our once was great service into the ground , the postmen & women work in all weathers going out with about ten bags of mail , which he or she could deliver to some 567 houses thats just one postie , and ive looked into why they was going on strike ,the biggest issue was the penions , why royalmail took a 13 year penion holiday and now they have got to work anougher 5 years to make up for royalmails mess up , adam Crozier was on radio 4 claiming that the posties get £440 a week i no that is spill because they get £323 a week , allways remember Crozier cock ups in the FA even the pro players was going to strke he always leaves a trail of deverstion behind him and so do allan leighton , sack both of them .
bob, london,
Five years the top managers have been doing there job and only now they they have a problem.As they signed the contact with Postcomm were they loss 6p per item.
If they did the same work as a postworker you can say they are 25% and 40 % that. But there is no need when you get a sub of 6p an item for the most profitable work.
As for the 3 hrs overtime for 30 min work do you think that in due to week middle managers.
Job and finsh was given by Mr Leighton as a reward for getting rid of the first post.
If they are doing such a good job why are they starting the postman latter and latter, so we will have post after 5PM.
Was the idea is force a strike and get the company sold off, that was management only last year when it got the loan.
Paul, Hayes,
I recently need to send a next day delivery to a customer during the industrial action. Normally I would pay around 9-10 pounds via the royal mail, but was quited in the region of 50 by one of the comapnies rivals...If the Royal Mail collapses under the weight of management blunders and Postcomms hampering I think I'll be driven to the wall with the likes of TNT and others charging what they like and only delivering to major cities across the country...I don't like the fact that I was losing custom but, what we see again is a systematic dismantling of a public service...We have seen what has happened over the years with the privatisation of the utilities and this could end up going the same way...With the customers bearing the brunt of it...I'm not saying the strikes are right or wrong, as I wouldn't want to be out on the streets in all weathers carrying heavy bags like my postie does..But someteimes you're pushed just so far and i think the posties have been puished as hard as can be.
M N, Leicester,
I have moved to Spain, having got fed up with how England is changing.
'Spanish practices' is a new term, to me, however as I am in the process of moving my business here too, and have experienced the work ethic here.
I can confirm that such 'worker power' is still a fair label for Spain, with the likes of 'Yellow Pages Spain' and 'Peugeot' employing staff that simply cannot be bothered to do their job or respond to those that wish to buy form them.
It's time everyone agreed to 'call a spade a spade', as a way to get us all to improve our national traits.
That includes the 'reserved' English and the deluge of new visitors who have fallen upon us (them), with some real nasty habits!.
Peter Marsh, Barcelona, Spain
TNT and many of the other key operators have already declared they are not interested in doing end to end delivery. So once again we the media have their facts wrong. They may shift trailer loads between the biggest companies, but will never be in a position to compete with Royal Mail once the regulator see's fit to make an even playing field. That is when you will see who is in it for the long haul. No company in their right mind large all small could justify £15 a letter when Royal mail can do it for 34p or approx £5 for special delivery.
Rick, Bristol,
I agree with both statements above, should the P.O stop delivering mail there will be public out-cry as the majority will be unable to afford to stay in buisness because of the cost charged by these fly by nights postal opperatives.
Jan, Rye, East Sussex
It's no use comparing Spanish practives, German wages and Dutch efficiency. We are talking about a uneque British postal service. Which I think is second to none. The America service is pathetic, they push mail into a bil at the end of the drive. European postal services don't to through door deliveries, the leave your mail in a collection of boxes for the customer to retrieve themselves. Compare delivery times also. What we need to do here is respect the service we have, be gretaful for it and respect the hard work done by those who deliver our mail. The European delivery persom has an electric cart, the American has a van. Our poor postal delivery people have to hump heavy bags! We need to agree that we by and large have a good service, invest in technology. Give delivery people electric carts. And most of all agree to pay the going rate. Motivate workers, motivate managers and train them better. Realise that by increasing prices it makes it easier for competition to compete!
Ray B, Newcastle upon Tyne, UK
Back in days Defoe. Ned Lud, The Levellers, Jarrow, Wapping. History has shown that when technology moves on leaving us out in the cold.
Sad but true.
andand@kent, Tunbridge Wells,
TNT and the other so-called mail delivery companies are not interested in the actual delivery of household mail. These companies are only interested in moving mail in large vans from their clients to the mail centres around the country. Minimum cost maximum profit. The real cost involved is the actual delivery. Remember bus deregulation? The profitable routes 100 buses an hour the less profitable routes one every 2 hours. TNT and the others just interest, the government should have made them responsible for delivery as well, then you would have seen how many companies backed away from the whole mail business. As for companies paying £15 for a letter to be delivered, they will cringe at that if they ever hit financial problems.
cj, manchester,