Opposition in the post for Royal Mail sale

Ministers are pressing on with a privatisation challenge that even Thatcher steered clear of. Lucy Tobin reports

If Royal Mail were invented today it would deliver letters a couple of days a week and parcels every evening. Rather than returning home to a red "Sorry we missed you" card, Fred Bloggs could expect his Amazon delivery to arrive after he got home from work, and would file away the odd birthday card or tax documents that still dribbled in by post.

But Royal Mail – which was founded in 1516 – today still has to deliver letters to every household in the UK every day from Monday to Saturday, under the orders of Parliament. Meanwhile, the Government is trying to package it up as an attractive investment. And unions and politicians of both the left and the right are loudly opposing a sale.

So it's no surprise that Royal Mail's privatisation has been "in the post", but not actually announced, for some time. Or that the Government hasn't exactly been shouting about it.

The Government's preferred sale would be a float on the London Stock Exchange, with postal workers nabbing 10 per cent of the shares in the company. To that end, Royal Mail this week appointed a registrar to establish an employee share scheme. Another profit jump will be announced on Tuesday.

Ministers have started racking up fees for the deal too, signing up UBS bankers to run their side. Royal Mail, meanwhile, has hired Barclays to look after its own back.

But there's a growing political consensus opposing the sale. This month the centre-right Bow Group sent a letter to Tory MPs, demanding the Government call off Royal Mail's sale because the amount of cash raised would "hardly [be] a sum that can compensate for the national and political damage it will cause".

It hasn't gone well in the past: legislation to privatise the post group that was passed in 2011 followed failed attempts by the Tories to do so in the 1990s; and Lord Mandelson had the unsuccessful idea of selling off a third of Royal Mail in 2009.

This is also the frontier where even Margaret Thatcher, who privatised BT, British Gas, the former British Airports Authority, British Airways and other such items of family silver, refused to go, famously saying of Royal Mail that she was "not prepared to have the Queen's head privatised".

Quite a different story is being told by Michael Fallon, the Business minister, who is in charge of the sell-off. Last month he said that privatising the postal giant was "the way to put Royal Mail on to a long-term sustainable basis". In the face of union dissent, he has even whispered the "F" threat: the Royal Mail could fall into foreign hands if unions fight an initial public offering (IPO), Mr Fallon has said.

"What kind of a threat is that?" responds Kevin Slocombe, of the postal workers' union the CWU. "What difference does it make to us – if he sells the company, he sells the company. Royal Mail has been fattening itself up for privatisation, but we're not accepting it."

The CWU is holding consultative ballots for members to reject cuts and job changes (mostly increasing posties' rounds) created for that "fattening up" process. "Delivery workers are already working to capacity," Mr Slocombe says. "You can't rule out industrial action."

But a more pressing concern for Royal Mail managers is that postal workers are also having a consultative ballot on boycotting competitors' mail – the "last mile" deliveries it carries out on behalf of rivals such as TNT and which comprise almost 50 per cent of Royal Mail's letter revenues. The first ballot is on 18 June, which could see a boycott this summer – at the very time when the Government hopes to show off Royal Mail's progress to profit, before a hoped-for autumn IPO.

The CWU – which says it has about 130,000 Royal Mail staff as members – says it's only just gearing up the scale of its opposition. "Our postmen and women interact with the public every day," Mr Slocombe adds. "They are ideally placed to carry messages." So you can expect to get some anti-privatisation information with your post one day soon.

Mr Fallon claims he is "surprised" by the CWU's "ideological objection to privatisation that would benefit all their membership" – if Royal Mail were sold or floated for £2bn-£3bn, staff would get £1,500-£2,300 each.

But what's in it for a buyer? Universal post services worldwide are struggling. The US Postal Service is stopping delivering letters on Saturdays as the firm – which delivers about 40 per cent of the world's mail – has seen revenues drop from $75bn (£49bn) in 2007 to $65bn in 2012, and losses last year hit $15.9bn.

Over here, Royal Mail has tried to counter the pain with a 40 per cent hike in stamp prices last year. That saw it post a 12 per cent rise in half-year, pre-tax profit to £114m for the six months to October, despite the number of letters in the average postman's daily sack continuing to fall.

Yet that stamp price increase cannot be replicated every year. And another big reason for Royal Mail's improved finances is that we taxpayers took over the burden of its giant pension fund, including its £28bn of assets and £38bn in liabilities.

So might underlying numbers, industrial grumblings and the continuing demands of universal service put off potential private buyers? Unlikely. If an IPO does not work, potential bidders include private-equity houses, such as CVC Capital Partners; Dutch postal giant TNT; and the sovereign wealth funds that have poured cash into snapping up British assets in recent years.

With the Government this keen, it looks set to push unions and politics aside to try to get the Queen's head privatised in 2013.