Royal Mail reveals mounting losses after £200m strike hit

Royal Mail has revealed the cost of strike action in a bitter dispute over pay and conditions has reached around £200 million, helping pushing the business to a hefty operating loss.

The group’s owner, International Distributions Services (IDS), revealed Royal Mail’s operating losses mounted to £295 million in the first nine months of its year so far, with the group hit hard by 18 days of strikes by workers.

Despite seeing six more days of industrial action than first forecast, it said Royal Mail was still set to meet guidance for annual operating losses of between £350 million and £450 million due to cost savings and strike contingency measures.

It claimed up to around 12,500 union members had worked on strike days.

This, together with efforts to offset walkouts by hiring agency workers, meant that more than 110 million parcels and 600 million addressed letters were delivered in December, according to the group.

But Royal Mail said its outlook for the full year was based on no more strikes in its fourth quarter and on the Communication Workers Union (CWU) accepting its “best and final” pay offer.

It also warned that further industrial action could risk more hefty writedowns on the value of Royal Mail’s cash-generating unit.

The group has recently resumed talks with the CWU, but it has been a lengthy dispute and the union this week launched its third ballot for industrial action.

Royal Mail’s owner is slashing costs and jobs under a swingeing overhaul of the letters and parcels arm.

It insisted on Thursday that the number of voluntary redundancies needed under plans to axe 10,000 roles will be “significantly” lower than first feared.

Industrial strike
CWU pickets outside the Central Delivery Office and Mail Centre in Birmingham in December (Jacob King/PA)

The group said it is still on track to cut its workforce by 5,000 by March and 10,000 in total by August, but that the number of voluntary redundancies needed will be far less than the 5,000 to 6,000 it initially expected, thanks to employee turnover and cutting variable full-time staffing.

In its trading update, the group reported further woes in the embattled Royal Mail business, with revenue plunging 16.7% in its third quarter to December 31, with letters down 7.5% and parcels down 23.6%.

The group faces mounting pressure on a number of fronts, with bosses under fire over their tactics in the dispute, as well as a cyber attack that left it unable to send international parcels.

It was also revealed earlier this week that Royal Mail boss Simon Thompson had been called back to appear in front of MPs after they accused him of providing information that “may not have been wholly correct” in a bruising recent appearance.

Mr Thompson has been asked to clarify his statements to the Business, Energy and Industrial Strategy Committee “at the earliest opportunity”, according to committee chairman Darren Jones.

After Mr Thompson spoke last week amid a dispute with the company’s union, MPs said they were sent hundreds of complaints questioning his claims.

In the session, he denied using technology tracking how fast employees were making deliveries and disputed claims that it is Royal Mail policy to prioritise parcels over letters, something that could breach rules.