Royal Mail has asked the government to cut its letter delivery service from six to five days as the beleaguered firm attempts to claw itself out of financial crisis.
The former state-owned company, also known as International Distributions Services (IDS), called on ministers to reduce the letter numbers to ensure the “long-term sustainability” of the universal service – the legal guarantee to offer the same price for deliveries across the country.
IDS posted an operating loss of £163m in the half year, 152.4 per cent down from the previous year, where it had a profit of £311m. Revenue was also down nearly four per cent to £5.8bn, with Royal Mail‘s delivery arm dragging the firm down.
Chief executive Simon Thompson told City A.M. he would do “whatever it takes” to turn the company around, confirming plans to shrink the workforce by 10,000 by next August, with around 5,000-6,000 redundancies required this year.
Royal Mail estimates that the Communication Workers Union (CWU) strike has already cost the firm £100m.
The company entered into pay discussions with the CWU earlier this year over the company’s 5.5 per cent pay rise. Deeming this offer “adequate” against soaring inflation, the union has held eight days of industrial action this year, with four further days coming.
Thompson said conversations with the union are ongoing, but suggested that further action over Black Friday – the biggest shopping day for online retailers and delivery partners – was still set to go ahead.
The Royal Mail boss said the firm was working on contingency plans. Hargreaves Lansdown’s equity analyst Matt Britzman said battles with unions are “never good for business
International Distributions Services continues to expect a full year adjusted operating loss of around £350m to £450m, including the direct impact of 12 days of industrial action, which have taken place or have been notified, but excluding any charges for voluntary redundancy costs
From an investor perspective, the delivery firm said it would not be paying an interim dividend, with the key focus on “stabilising Royal Mail”.