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Among the first industrial tests facing an incoming Labour administration is what to do about the Royal Mail.
The owner of Britain’s postal system, International Distributions Services (IDS) is proposing to sell a vital part of UK infrastructure to Czech billionaire Daniel Kretinsky and a controversial Slovakian finance group, supported by overseas banks, for £3.6billion.
Labour, in its manifesto, pledges to ‘robustly scrutinise’ the transaction and to give workers ‘a stronger voice.’
A big majority in the General Election provides no excuse for not keeping to its word.
My conversations with former senior executives and the unions illustrate precisely why selling off a historic company and huge employer to overseas financiers with faint understanding of the national interest is a dreadful idea.
National asset:The owner of Britain’s postal system is proposing to sell a vital part of UK infrastructure to a Czech billionaire and a Slovakian finance group
The price at which a feeble board is selling is inadequate. Yet active investor Schroder, with a 6.23 per cent stake, and UBS asset management with 6.3 per cent have, so far, been silent. The timing is madness.
It comes after a debilitating industrial dispute and positive outcomes have yet to be reaped.
The regulator Ofcom, headed by former senior civil servant Melanie Dawes, has been late to the party in forging a new settlement for the universal service obligation (USO), which requires delivery six days a week and to the last mile.
Moreover, loading up an indebted balance sheet with further short-term leverage does not make sense.
Instead of the muscular defence which boards are obligated to put up when they come under siege, the directors of IDS have been flaccid.
Chairman Keith Williams preferred to negotiate terms of the sale, in the form of agreements that will be hard to enforce, rather than at the very least fight for an even better price.
Senior non-executive Sarah Hogg, 78, has a long and distinguished career including a spell as a City editor.
But in her role as a sounding board for dissident shareholders and other stakeholders, her voice has not been heard.
As for the rest of the non-executive directors, mesmerised by their misconceived notion of fiduciary duty, they have behaved like nodding dogs.
The main reason for Royal Mail vulnerability is the prolonged disputes with the Communications Workers Union (CWU), which has stood up for the rights of the workforce.
Yet the agreements which emerged on pay, conditions and reforms to the delivery systems, designed to give the postal service a lifeline, have not been given time to deliver. It is axiomatic that in year two after a settled industrial dispute, there is an earnings recovery.
The offer document for IDS last week confirms this, with a forecast of a ‘return to adjusted operating profit’ in 2024-25.
Existing investors, including the workforce and private shareholders, have endured the downside and Kretinsky and his cronies will enjoy the upside.
Running the Royal Mail in the face of fast declining volumes was always going to be challenge, not least because of the USO.
The CWU recognised this but reckoned that, with more alert management, in an age of online shopping, parcels could have taken up the slack.
On the Continent, regulators recognised several years ago that their USOs needed to be modernised, allowing many services to keep jobs intact and mend the finances.
Ofcom, the UK regulator, was not at the races until recent months, by which time the ghouls were circling.
Governing is hard and Labour has a particular obligation to working people, about whom it endlessly talks, and the unions which help finance its operations. It cannot, like the Tories, absolve itself of its obligations in the name of free markets.
The Royal Mail offers a vital public service and works in tandem with the NHS, HMRC, the Metropolitan Police and returning offices during elections.
If ever there were a moment for a new government to show it will use the full force of regulatory powers to inoculate UK firms from foreign marauders, it is now.
Invoking the National Security & Investment Act, and ending the calamitous deal for IDS, is a no-brainer.
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