By Richard Johnstone| 12 September 2013
The Royal Mail is likely to be privatised before the end of the year after the government announced today that the sell-off of the firm would begin ‘in the coming weeks’.
In an announcement to the London Stock Exchange, the Department for Business Innovation and Skills said the government had not yet decided how much of the state-owned firm it would sell. This will be decided on the basis of demand from investment institutions – however, the department said it expected a majority stake would be offered.
In addition, Royal Mail employees will be given a 10% share in the company, and will also be given first refusal to buy additional stock. Shares will also be offered to the general public, at a minimum cost of £750.
Announcing the decision to float the firm, Business Secretary Vince Cable said the announcement was ‘an important day for the Royal Mail, its employees and its customers’.
He added: ‘These measures will help ensure the long-term sustainability of the six days a week, one-price-goes-anywhere universal postal service.
‘By announcing today that we intend to move ahead with a sale of shares in Royal Mail, we are completing the third and final part of the reforms agreed by Parliament two years ago. This delivers on the commitment in the Coalition Agreement to give Royal Mail access to private capital, including opportunities for employee ownership.’
Moves toward the initial public offering follow the passage of the Postal Services Act in 2011, which lifted restrictions on Royal Mail's ownership. In addition, the legislation established a new regulatory regime for postal services – with Ofcom as the new postal market regulator ¬– and transferred the Royal Mail’s historic pension deficit to the Treasury.
However, the Communications Workers Union said the plans to sell the firm into private ownership were ‘a betrayal of the British public’. The union is currently balloting 125,000 postal workers over whether to take strike action over changes in employment terms that could take place after the firm is in private hands.
Communication Workers Union general secretary Billy Hayes said privatisation was not best for the Royal Mail, as it would be more expensive for the firm to borrow in the private sector than under public ownership.
‘There's no competition with money for schools and hospitals as the government would have you believe – look at Network Rail which has borrowed billions on private markets at cheaper rates under an arrangement which doesn't affect public debt,’ Hayes said.
‘We remain convinced that privatisation is the wrong decision for Royal Mail. It would be bad for customers, bad for staff and bad for the industry. Privatisation would put jobs and services at risk and lead to higher prices for customers. We've seen it happen time and again in other industries.’
Labour’s shadow business secretary Chuka Umunna said the sell-off was required ‘to fill the hole left by George Osborne’s failed plan’.
He added: ‘This is taking place despite opposition from a huge coalition including the Conservative Bow Group, the Countryside Alliance, the National Federation of SubPostmasters, the cross-party BIS Select Committee as well as Royal Mail employees themselves.
‘The government has not addressed the huge concerns which remain on the impact the Royal Mail sale will have on consumers, businesses and communities, but ministers are ploughing on regardless.’
