Royal Mail axes 2,000 jobs as it loses £1m a day

THE corporate firefighter brought in to turn around Royal Mail is facing a bruising battle with Britain’s biggest trade union after announcing plans to axe around 2,000 management jobs.

Executive chairman Keith Williams said slashing costs and overhauling the business would ‘help ensure the survival of Royal Mail in the UK’, where the company is losing £1m a day.

But the Unite union said it was ‘devastated’ by the cuts and vowed to prevent any compulsory redundancies.

The 504-year-old postal service has come under fire for being too reliant on the shrinking letters market, and failing to invest heavily enough in the growing parcels business.

Williams said this switch had been ‘accelerated’ by the coronavirus crisis.

The 64-year-old said the ‘unprecedented nature of the pandemic’ and the lockdown that has confined people to their homes, has compounded Royal Mail’s problems, with letter volumes plunging by a third in the last two months.

Parcel volumes, meanwhile, have surged amid a boom in online shopping.

As Royal Mail posted a slump in profits, suspended next year’s dividend, and warned it faces a £500m hit from the coronavirus crisis, Williams revealed the UK business is losing £1m a day.

In an open letter, he said: ‘Some businesses may expect to see their markets bounce back unchanged once the current crisis is over. Others, like Royal Mail, must face up to the fact their business has changed.’

The City heavyweight, who became chairman of Royal Mail last year but took over day-to- day running of the company as interim executive chairman last month following the ousting of chief executive Rico Back, is a veteran of industrial disputes.

As boss of British Airways, he was lauded for defusing a two-year pay dispute with the Unite union, which had led to a series of crippling strikes by cabin crew.

Now – just six weeks after taking the reins at Royal Mail – he is taking on Unite again, this time by targeting management jobs in a bid to lop £130m off its annual wage bill.

Royal Mail employs around 9,700 managers, with around 2,000 expected to be cut after a 45-day consultation process. It said around half of its senior leaders would go, with the axe falling heavily on backoffice roles in areas such as finance and IT. Front-line postal workers will be not be included in the cull to ensure ‘quality of service is preserved’.

As part of the modernisation drive, Royal Mail also said it wants to slash costs by £300m over the next two years. And it is calling for a review of the universal service obligation, which obliges it to deliver mail throughout the country at uniform prices, six days a week – putting it at a disadvantage to its newer rivals.

But yesterday Unite blamed the cuts on ‘poor decision-making in the past by Royal Mail’s top bosses’ and their failure to ‘keep abreast of the huge growth in parcels’.

Mike Eatwell, Unite’s national lead officer at Royal Mail said: ‘This has led to this situation where Unite’s more than 6,000 members are now facing an uncertain future – it is a devastating blow for them.’ Shares plunged 12pc, or 22.35p, to 157.5p meaning they are worth well under half the 330p they were sold at when the firm was floated in 2013.

Russ Mould, investment director at AJ Bell says the ‘ debate over who got short-changed’ when Royal Mail was floated is over. ‘ Investors, who should have known the risks they were taking with the stock, and unfortunately employees, who may not have, got the worst of it,’ he added.