Postal service plans unveiled

THE government unveiled its plans to privatise the Royal Mail yesterday, but independent valuations suggest the business could fetch just £700m.

Royal Mail will now almost certainly be swallowed up by a competitor like Deutsche Post or TNT, or bought by a private equity-led consortium.

A stockmarket flotation is also being considered, while at least ten per cent of the business will go to workers through an employee share scheme.

The government is not expected to keep a stake in the business.

Vince Cable, the business secretary, also said the Post Office network?– which is separate from Royal?Mail – would likely be mutualised, with ownership transferring to staff or local communities.

Cable declined to say how much the coalition expected to sell Royal Mail for, although a private study done by Trova Consulting for the government estimates it could fetch as little as £700m.

Buyers are likely to be deterred by the decision to enshrine Royal Mail’s “universal service obligation” into law, meaning the business must deliver any letter anywhere for a single price from Monday to Saturday.

The government hopes the bill will receive Royal Assent by next summer, making a sale in the second half of next year or early in 2012 most likely.

The government will take responsibility for the Royal Mail’s pension fund deficit currently estimated at £8bn.

Cable attempted to avert a showdown with the Communication Workers Union (CWU) over the proposals, insisting that unionised workers knew there was no other viable alternative for the business.