International Postal Update — October 2010


Citing a “lethal combination of circumstances” threatening Royal Mail’s viability, Vince Cable, Business Secretary of the country’s conservative-liberal coalition, said on September 10 that the government is moving ahead with controversial legislation to privatize Britain’s postal service. Privatization is the only way to continue to provide universal mail service in Britain, said Cable.

Royal Mail’s financial position, the Secretary said, has deteriorated precipitously in the 18 months since an independent survey — commissioned by the then-ruling Labor majority in 2008 — concluded that privatization was virtually the only alternative to the collapse of Royal Mail. Based on the Hooper Report, Labor initially pushed privatization but then abruptly abandoned its legislation in the face of fierce and well-organized opposition from unions.

Cable said unfunded pension liabilities have soared from £5 billion to approximately £10 billion in the course of two years, and some estimates put the actual figure closer to £15 billion. At the same time, British daily mail volume has declined from 84 million pieces in 2005 to 71 million pieces in 2010, according to the Hooper Report. Royal Mail’s losses on its letter business climbed to £333 million, up from £200 million last year. The service’s £36-million cost-cutting initiatives have not been able to close shortfalls, and Royal Mail has been unable to tap credit markets for funds to survive. “Without serious action,” said Cable, the agency simply “cannot survive in its current form.”

The new legislation, according to the government, would allocate a block of shares to Royal Mail staff so they would maintain a stake in the business. The physical network of postal branches would be split off and continue to be managed under government ownership. Only sorting and delivery functions would be part of the entity to be put up for sale.

Unions oppose the proposed plan. A spokesman for the Communications Workers Union said that the sale would inevitably destroy a national institution, reduce service, raise costs to consumers, and only provide profits to foreign investors. The CWU claimed the government was maneuvering to “seize” postal workers’ pension assets, which the union said were worth £26 billion.

Details for the legislation are expected to be finalized in the fall of 2010.


Labor unions in Europe have been demanding that EU representatives scale back, or even eliminate, the 2011 deadline for member nations to open their mail markets to private competition. At a recent meeting in Strasbourg, vocal demonstrators from more than 150 European trade unions told EU Parliament members that in today’s unstable economies, legislative mandates for liberalization were unwise and should be halted.

Union officials and their allies in Ireland and Great Britain, among other countries, have warned that liberalization will result in substantial job losses for postal workers, while the loss of universal service would prove harmful for many.


At the 2010 Universal Postal Union Strategy Conference in Kenya, IMF head Dominique Strauss-Kahn and other leaders argued that national posts have a useful role as providers of financial services, especially for populations typically ignored by traditional banks. UPU Director General Edouard Dayan described his agency as well-positioned to help advance United Nations development goals, including promoting financial inclusion. Dayan also argued that national posts struggling with declining mail volume may find financial relief by diversifying into non-postal products and services.

Developed countries are weighing entry into the financial services arena as a tactic for diversifying their revenues. The head of the Canadian Union of Postal Workers, for instance, has called on Canada Post to begin offering banking services. He believes that rural and low-income consumers represent an underserved portion of the population that could deliver Canada Post a significant growth opportunity. “Between 1993 and 2003, for example, Newfoundland and Labrador lost 23% of their bank branches. While Canada has talked about postal banking, the rest of the world has been doing it,” he said.

Canada Post already offers money transfers as an agent for MoneyGram.

International Postal Update