Cable eyes Post Office privatisation

BUSINESS secretary Vince Cable is reviving plans to privatise the Royal Mail, after the previous government shelved similar proposals in the face of backbench rebellion.

City A.M. understands that today’s coalition agreement will include a pledge to “inject private capital” into Royal Mail, in a bid to modernise the archaic postal service.

The Liberal-Conservative government will also seek to sell shares in the privatised Royal Mail to postal workers, potentially avoiding a wave of crippling strikes.

An aide in the Department of Business Innovation and Skills said Cable wanted to privatise the Royal Mail while “encouraging employee ownership”, a scheme that is intended to win over possible dissenters by making them shareholders.

Ed Davey, a Lib Dem minister in the department has been charged with leading the privatisation.

Cable’s predecessor Lord Mandelson abandoned similar plans in July 2009, claiming that depressed market conditions meant the government was unlikely to secure a decent offer. However, Mandelson privately admitted he shelved the proposals to avoid an embarrassing backbench revolt that could have dragged on until polling day.

Potential bidders include Dutch postal giant TNT, Deutsche Post and private equity house CVC, who were all interested when Royal Mail was last on the rack. Back then, it was thought that the sale of a 30 per cent stake could raise around £3bn.

The government is desperate to bring in an investor from the private sector to improve profitability, helping to plug the Royal Mail’s huge £10bn pension deficit.