Royal Mail - All Systems Go - with Deals on Offer for Corporate Clients?

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11 October 2013 | Updated 01 January 1970

With the conditional trading of Royal Mail shares starting today, the arguments centring on the privatising of this organisation are familiar ones. Will the Government get value for money? Will the public experience a deteriorating service and will the trades unions, who are against the whole move, pull off a damaging strike?

Seen in a European context, the UK is following similar privatisations in Germany, the Netherlands and Austria. Postal services in the USA remain state owned. Attempts to part privatise Royal Mail were attempted by the Blair Government and John Major before that.

The creeping opening up of competition became more obvious from 2006 onwards. Parcel services have been operating in a more competitive environment for some years and more recently, companies like TNT Post, have begun delivering to the public and businesses in parts of London. The UK mail market has an estimated value of £7 billion with express parcels standing at £6.6 billion. Royal Mail dominates the market with revenue of £9 billion but how well it protects its market share is open to question.

All the indications are that parcel post will see the entry of a significant number of players for this sector, especially with the dynamic growth in internet buying. Here we would expect an influx of new names with more flexible practices to challenge Royal Mail’s Parcelforce. One example is DPD, owned by La Poste in France which will be investing £175 million over five years to increase its delivery service.

The mail delivery side is generally considered to be less attractive, partly because of a declining market (it fell by 8% last year) and that question of ‘the final mile’ delivery. But as seen with TNT Post above, Royal Mail can expect increased competition in some of the more profitable areas.

However, one area of interest for facilities managers will be what will be on offer from parcel and mail operators with the continued liberalisation. With its still dominant position, there are expectations that Royal Mail will offer cut price deals with bigger clients, even though it pushed through significant increases in April.

In short, it’s better to look beyond the share dealings today. We have a situation that at the time of going to press, the Government set 330 pence per share had zoomed to 456 pence. So, with full trading next week, we are in for a roller coaster of a ride. Far better to analyse what will be on offer in terms of services in the future and agree with this conclusion. Privatised Postman Pat is likely to be a very different person in the coming years.

Article written by Mike Gannon | Published 11 October 2013

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