Royal Mail chairman says firm is at ‘crossroads moment’ as it balances union action with productivity woes

Royal Mail chairman Keith Williams has said unions shouldn’t expect a no-string pay deal “where nothing changes”, as the firm balances dwindling productivity alongside rising union tension.

With both Unite and the Communication Workers Union (CWU) taking aim at Royal Mail, Williams told The Sunday Times that the company has reached a “crossroads moment”.

“I’ve been very clear with investors that this is a difficult, probably the most difficult, union relationship job there is,” he said, before adding: “We’ve run out of road”.

Royal Mail said it offered a 5.5 per cent pay rise to workers, with a further 3.5 per cent dependent on achieving efficiencies. As it stands, Royal Mail’s wage bill is £5.5bn, and Williams said that even the 5.5 per cent offer would result in a “headwind” of £250m.

“What is it that offsets that headwind? Previous agreements with the union have delivered pay but they’ve not delivered the productivity to offset it, in a market where our revenue has been flat.

The problem with where we are is that the unions want a no-strings pay deal where nothing changes. But we need to pay for that pay deal through productivity”, he said.

Adding on Williams’ comments, a Royal Mail spokesperson said “We believe there are no grounds for industrial action. We offered a deal worth up to 5.5% for CWU grade colleagues, the biggest increase we have offered for many years, which was rejected by the CWU.

“We need to reach an agreement on the changes required to ensure Royal Mail can grow and remain competitive in a fast-moving industry, securing jobs for the future and retaining our place as the industry leader on pay and terms and conditions.

These changes include: more parcels on Sunday – and at scale, more flexible working patterns and, at the same time reducing our environmental impact i.e. reducing our reliance on flights and increasing our use of rail.”

CWU’s deputy general secretary Terry Pullinger previously lambasted offers as “totally inadequate”, and is trying to rally 115,000 workers to prove it. CWU are expected to post ballot results on 19 July.

Royal Mail posted group-wide operating profit of £758m in May, and raised prices by 10p to 95p first class stamps for customers, as well as imposed hikes across second class and packages.

Unite separately announced that 2,000 Royal Mail managers would strike on 20 July to 22 July. “They [Royal Mail] are being driven entirely by a culture of greed and profiteering which has seized a 500-year-old essential service, driving it close to ruin”, Unite general secretary Sharon Graham said.

Unite also claims that Royal Mail actually imposed £7,000 pay reductions in some cases, which the company fervently denies.

Royal Mail said it was “disappointed” by Unite’s action, having been in discussions with the union since November 2021 about the reduction of 700 managerial roles. The publicly listed firm said there were “no grounds for industrial action”, citing the extended consultation on its recent restructure and commitment to protecting pay for all managers who stay with Royal Mail.

Royal Mail is also facing an Ofcom inquiry into its failure to meet targets in the past year, missing the first class and second class delivery targets by 12 and three per cent respectively.