EU to investigate Royal Mail plan

29 July 2011 Last updated at 10:53 GMT The UK government said it was confident that its plan was in line with EU guidelines The European Commission has begun an investigation into whether the UK government's plan to overhaul the Royal Mail contravenes EU rules on state aid.

The government plans to take on Royal Mail's ?8bn pension deficit and restructure its ?1.7bn debts.

The Commission said it doubted that the plan did enough to deal with how much it would distort competition.

The UK government said that its plan was in line with EU guidelines for rescuing firms in difficulty.

It wants to privatise some or all of the Royal Mail, but needs to sort out its finances first if a buyer is to be found.

"The Commission acknowledges the importance of the reform of the postal market in the UK," said Competition Commissioner Joaquin Almunia.

"However, we must ensure that the state measures do not provide undue advantages to Royal Mail as this would distort the conditions of competition among postal operators in the internal market."

Postal Affairs Minister Edward Davey said the investigation had been expected and was the next step in the government's attempts to reform the Royal Mail.

"It is only right that the Commission has opened the State Aid process to properly investigate the case," he said.

"However, we are keen to resolve the case as soon as possible, and are seeking a resolution by March 2012."

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Lower mail volumes hit Royal Mail

14 June 2011 Last updated at 17:08 GMT Royal Mail is in the midst of a major programme to cut costs as revenues decline Royal Mail has reported sharply lower annual profits, due in part to falling mail volumes.

Operating profit, including the costs of modernisation changes, was ?39m in 2010, down from ?180m in 2009, the group said.

It blamed falling revenues after the number of letters and parcels carried last year fell by 4%.

Royal Mail also said it would be making further job cuts and mail centre closures as it tries to reduce costs.

"With the decline in our volumes, we are going to be a smaller company in the future than we are today," its chief executive Moya Greene said, adding that it would be "disrespectful" to put a figure on the number of jobs that will go.

Previous cuts have been made through voluntary redundancies and Ms Greene said she was confident that no compulsory redundancies would be needed.

'Financial difficulty'

The job cuts are part of Royal Mail's modernisation programme, which it says is one of the biggest of its kind undertaken in the UK.

The measures, agreed with the union after a long industrial dispute, involve 7,000 jobs going each year. But that number now looks set to rise, says BBC employment correspondent John Moylan.

Royal Mail expects to close up to 20 mail centres over the next five years. Each one can employ about 1,000 people. Jobs will also go at delivery offices as new sorting machinery is introduced.

This will all be in addition to the 45,000 jobs which have gone from the UK letters and parcels business over the last five years, reducing the total number of staff to about 163,000.

"Royal Mail has been in significant financial difficulty for a number of years," said Ms Greene.

"Our challenge is to put [it] on a sound, secure and sustainable footing."

It has invested ?400m in the modernisation process in the past financial year.

It has also been announced that Moya Greene has been paid ?637,000 in the nine months since she took on the job.

Those payments are made up of ?350,000 in salary, a performance bonus of ?142,000 and other benefits of ?145,000, which includes payments to cover the cost of her relocating from Canada.

'Tipping point'

The Communication Workers Union (CWU), which represents most postal workers, said the changes under the modernisation programme were putting a severe strain on staff and said it could not rule out further strike action.

"Royal Mail's biggest challenge is to recognise that postal workers are working harder than ever and are now at a tipping point," said CWU deputy general secretary Dave Ward.

"We understand the need to modernise the company, but Royal Mail must accept that people come first and the pace of change can only be dictated by what people can cope with," he added.

Royal Mail's results showed the financial strain the company is under.

It is technically insolvent as its liabilities, including its pension fund, exceed the value of its assets.

The size of the pension fund deficit has however, almost halved, from ?8bn in 2010 to ?4.5bn in 2011. Royal Mail said it had paid ?771m into the pension fund during the financial year.

The drop in liabilities is largely due to the government's plan to change the inflation measure used to calculate pensions from RPI to the typically lower CPI.

Meanwhile the government is proceeding with plans to sell or privatise Royal Mail. The Postal Services Act received royal assent this week.

The change in regulation will allow the government to take on the pension burden and for the potential sale or privatisation of the business.

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Royal wedding boosts retail sales

19 May 2011 Last updated at 14:38 GMT The royal wedding gave people an extra day in which to shop UK retail sales rose by more than expected in April, boosted by the extra public holiday for the royal wedding, and the warm weather.

Sales last month were 1.1% higher than March, said the Office for National Statistics. Demand rose most for clothing, footwear and food products.

It was the biggest rise in retail sales for April since 2002.

But economists warn the big rise in sales is likely to be a one-off, and that consumer spending remains muted.

Weaker May?

Analysts were prepared for the extra public holiday to give retail sales a boost last month, but expected them to rise by only 0.8%.

George Buckley of Deutsche Bank said: "On the face of it they are stronger numbers. It's looking a little better, but I suspect we will get some pay-back in May."

April was the warmest on record in the UK, and this appears to have lifted sales of clothing and footwear, which rose by 3.2% as people bought summer items. Food sales were up 2.2%.

Continue reading the main story

The strong retail sales figures for April strengthen hopes that the economy has continued to grow in the second quarter of the year”

End Quote David Kern BRC chief economist Howard Archer, chief UK and European economist at IHS Global Insight, also said the April figures should be treated with caution.

"While welcome, we strongly doubt that the 1.1% jump in retail sales volumes in April is a sign that the consumer is roaring back to life," he said.

"Rather, what it suggests is that pressurised consumers need a particularly favourable set of circumstances to part with their cash."

Last week, the British Retail Consortium (BRC) also said that the warm weather and extra public holiday had boosted sales in April, which it reported had risen 5.2% on a like-for-like basis.

The BRC said champagne and garden furniture were among the items most in demand as the nation celebrated the royal wedding and enjoyed the sunshine.

The British Chambers of Commerce (BCC) said the latest official retail figures were "encouraging".

BCC chief economist David Kern added: "The strong retail sales figures for April strengthen hopes that the economy has continued to grow in the second quarter of the year."

A separate report by the CBI business organisation said that growth in British factory orders had accelerated more than expected in May.

The CBI's monthly industrial trends survey also found that the level of inflation faced by factories had eased to its lowest level since December of last year.

However, the latest figures from the UK car industry show that it has been affected by a reduction in the supply of parts caused by the earthquake and tsunami in Japan.

The Society of Motor Manufacturers and Traders said production in April was 7% lower than a year earlier.

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