Royal Mail shareholders have been advised to sell their shares in the wake of the newly announced pay and pension deal.

Yesterday the postal operator announced its board had approved the agreement reached with the Communication Worker's Union, bringing an end to the long-running pay feud.

Employees will receive a 5% pay rise backdated to October 2017, which will also apply to the 2018/19 financial year. They will then see a 2% pay rise in April 2019.

Market analyst Jefferies said the final pay deal was a bigger cost increase than anticipated, particularly when factoring in the shorter working week included in the agreement.

Its recommendation to shareholders was that Royal Mail was underperforming; a term used to prompt non-urgent share sales.

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Analyst Liberum was more favourable towards the renegotiated pay deal, but advised shareholders to sell all the same.

It said the pay deal was "more moderate" than expected, as it had anticipated more impact from inflated RPI rates.

However it said the reduced working week, dropping to 39 hours in 2018 with a commitment from Royal Mail to aiming for 35 hour week by 2022, offset the savings from the pay deal.

The shorter hours will create a "potential productivity headwind", it said, and suggested Royal Mail will need new initiatives to boost productivity as a result.

The pay and pensions deal is still dependent on CWU members voting in its favour, however the union has recommended they do so.

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