With talk of privatisation plans since the 1980s, the government last week finally decided how it is going to generate the cash needed to remove Royal Mail from state ownership, in the form of an initial public offering (IPO).
The privatisation process has been stalled numerous times since talks began: once in 2008 when a report commissioned by the then Labour government showed that a privatised Royal Mail would threaten the ‘universal service’ and again in 2009, when a Bill was dropped due to the government being unable to identify a suitable partner.
The current plans only began to take shape when The Postal Services Act was passed in 2011 and regulator Ofcom was appointed to ensure that a ‘one price goes anywhere’ service remains across the UK.
After turning a £41m loss into £99m pre-tax profit during the first six months of the 2012/13 financial year Royal Mail looks like it is on its way to joining other profitable post-privatisation carriers in their success. Business minister Michael Fallon believes that a privatised Royal Mail could mimic the success of other operators on the Continent, which also provide a universal service, including Austria Post, which delivered a 22% profit margin in 2011 and Belgium’s Bpost, which returned to profitability after receiving private capital in 2006.
But a vital question remains- at what cost will this success come? Royal Mail itself says it will secure as many jobs as possible, but it will become a smaller company in future.