Monday, 22 July 2013

E-commerce precipitated Royal Mail privatisation

Earlier this month, the government confirmed its plans to privatise Royal Mail, following legislation passed in 2011 to pave the way for the sale. Business Secretary Vince Cable announced that a majority stake in the business will be sold through a flotation on the London Stock Exchange, and that 10% of shares in the business would be given to Royal Mail employees. The exact size of the stake to be sold will depend on market conditions at the time of the sale, which will take place before 31st March 2014, and which the UK media have speculated will happen this Autumn.  

The main reason for the sale given by the government, along with Royal Mail managers, is that the organisation requires private capital in order to develop in the way demanded by changes to the mail market. E-commerce has been cited as a primary factor in this: less letters are posted at a time when the demand for parcel delivery is rapidly increasing due to growing numbers of people shopping and doing business online. Royal Mail currently faces competition from private door-to-door couriers such as TNT Express and DHL Express

Unions and other campaigners against the sale warn that privatisation could eventually lead to reduced service levels, and poorer terms and conditions for postal workers. At a time when door-to-door courier services are available at much reduced rates when purchased through resellers such as Transglobal Express, it does seem that maintaining Royal Mail as a commercially viable entity will prove challenging if it plans to guarantee its six day service and set prices regardless of UK destination.

No comments: