Royal Mail to change name paving the way for a break-up

Proposed break-up is a last roll of the dice by a business riven by strike threats and parcel chaos, and which is running out of ideas

ROYAL Mail is to change its name after more than 500 years, ahead of a possible break-up that would unlock up to £1bn for Czech sphinx investor Daniel Křetínský.

The company, which dates to the reign of Henry VIII, is to be known as International Distributions Services. Its UK delivery arm will continue to be known as Royal Mail.

Executives also unveiled plans to separate the business into UK and international units in a thinly veiled threat to union barons. British operations are currently losing around £1m a day.

They told the Communication Workers

Union (CWU), whose 115,000 members yesterday voted in favour of strike action, that the split would go ahead unless “significant operational change” is achieved.

Mick Jeavons, the finance chief, said the new name reflected the business’s increased dependency on its international arm GLS – previously called “German Parcel”.

He added that the company had spent “nothing” on coming up with Royal Mail’s less regal new corporate identity.

Mr Jeavons said: “We haven’t [even] engaged a marketing agency to come up with the name.”

Simon Thompson, Royal Mail chief executive, refused to comment on whether planning for a corporate separation and the name change followed pressure from Mr Křetínský, the company’s largest investor with a 22pc stake in the business.

The split plans would make GLS operationally separate from Royal Mail’s UK business, potentially paving the way for a sale. City sources said GLS could fetch a valuation of around £4bn – making Mr Křetínský’s gross share of the business worth £900m.

Mr Thompson said: “We don’t comment on what our shareholders are thinking or feeling. This was a decision that was made by the board.”

Royal Mail has lost ground to techsavvy rivals such as Amazon since its privatisation and float on the London Stock Exchange in 2013.

Bosses want to transform the service into a parcels-focused operation amid dwindling letter volumes. The CWU has faced accusations of standing in the way of change.

Royal Mail has offered workers a 5.5pc pay rise, but only 2pc is guaranteed. The balance is conditional on changing to working practices that include a greater degree of automation.

Meanwhile, the CWU has announced a second ballot to strike against changes to working conditions, which could lead to action even if a new pay deal is agreed.

‘We did it. Yes!” Britain’s trade unions are sensitive to the accusation that they revel in industrial action. But the reaction of the Communication Workers Union to the decision of Royal Mail postal staff to strike over pay hardly creates the impression of an organisation that can be relied upon to negotiate calmly, rationally and in good faith.

The CWU’S Twitter feed called the result “stunning”, an unfortunate choice of words when you consider what it means in practical terms. The majority of Royal Mail’s 140,000-strong workforce can now walk out at just two weeks’ notice, bringing the UK’S postal service to a near standstill. Staff have rejected a pay rise of up to 5.5pc, 2pc of which is guaranteed, with the balance dependent on sweeping reforms to working practices.

There is little reason to believe that Royal Mail will be bullied into offering a better deal, if the tone of management’s latest communiqué is anything to go by, so one wonders why the CWU is seemingly so delighted with events unless its main objective is simple ruination.

With some of Britain’s biggest unions captured by the hard Left, the sense is that they are mostly intent on scoring political points against a Conservative government – even if that means inflicting maximum chaos and disruption on ordinary workers at a time of already great strife.

An unrealistic demand for a “no strings, inflation-based” increase at a time when prices are soaring at their fastest rate for 40 years is hardly the basis for a proper negotiation.

It paves the way for the biggest strike in a looming summer of discontent. Binmen, court staff, BT and Openreach workers have already joined rail, healthcare, postal and parts of the civil service in a huge wave of walkouts that threatens to bring Britain to a standstill as it teeters on the brink of recession.

The thawing of tensions between Royal Mail and the unions after last year’s pay deal now seems like a lifetime ago. Company chiefs have been left tearing their hair out at the failure to force through what are regarded as modernisation plans vital to the survival of the former state-owned postal monopoly.

So, in response to the impasse, the board has upped the ante. A decision to change the name of a uniquely British institution whose foundations were laid more than 500 years ago by Henry VIII is a strange one on the face of it. Traditionalists will be up in arms, but by and large it’s unlikely many people will care.

After all, it’s only the parent group that will go by the dull and uninspiring title of International Distributions Services. The Royal Mail name will endure on the ground, and it’s nowhere near as bad as “Consignia”, the disastrous rebrand that lasted just 16 months at the turn of the century.

But IDS? No company wants to be confused with one of the Tories’ most forgettable leaders. It smacks of rearranging the deckchairs on the Titanic.

This seemingly facile project may yet prove to be more than just a marketing exercise. The move paves the way for a radical break-up in which Royal Mail’s fast-growing international logistics unit GLS is separated from its struggling core UK operations, which are racking up losses of £1m a day as a pandemic-driven boom in parcel deliveries that has been offsetting sliding letter volumes peters out.

This is a significant escalation in the company’s efforts to push through reform. It is the equivalent of holding the feet of workers to the flames, a message of defiance that says: “If you insist on standing in the way of change then we will set the best part of the business free and cast the bad bit adrift.”

But it is also a high-stakes gamble that could backfire. The rationale for the separation is that continuing losses at its main postal arm is dragging down the more profitable overseas division.

Without what the company describes as “significant operational change” in the UK, plan B is a carve-up that would protect the group’s “value and prospects”, it says.

The logic is reasonable enough, but a break-up would be costly and time-consuming, and there is no guarantee that it would provide the dramatic transformation that Royal Mail seeks. It reeks of panicked corporate finance alchemy – the last desperate roll of the dice from a company running out of time and ideas.

Analysts doubt a standalone GLS could compete with Amazon and others. What would become of the legacy UK arm without the “cross-subsidies” of its pluckier corporate sibling? Presumably, it would still be required to meet its obligations to deliver six days a week under the universal service obligation.

The proposal also presumes that the CWU would allow such an extreme measure to take place, which seems inconceivable. Indeed Dave Ward, the general secretary, wasted little time in branding the threats “pathetic”, calling on Royal Mail’s board to “consider their futures” and warning “not a single postal worker will budge until you give them a dignified, proper pay rise”.

What if ultimately the union chiefs call the company’s bluff ? Is it prepared to fire the gun on a complex corporate dismembering act? Either it’s a good idea or not, and if it is, then the board should get on and do it regardless.

With the two sides now further apart than ever, it is hard to see how the summer’s most bitter industrial stand-off can be resolved at all, never mind sensibly or amicably.

‘Royal Mail’s struggling core UK operations are racking up losses of £1m a day’