Royal Mail losing £1 million a day as staff disputes and weaker demand dent progress

The boss of Royal Mail has said disputes with unions over job cuts and pay have stalled transformation plans but stressed the company is still open to talks with unions.

The warning came as the firm posted a slump in sales and told investors that weaker parcel demand and “stalled” cost savings will weigh on its outlook for the year. Bosses said the business lost £1 million each day over the latest quarter.

It comes a day after more than 115,000 postal workers at Royal Mail voted to strike over pay in what is expected to be the biggest industrial action to hit Britain this summer.

Royal Mail chief executive Simon Thompson said: “I am ready to talk about pay and change at any time. But it has to be both.

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“When we previously spoke to the unions we said there needed to be an improvement in productivity, but it has not gone forwards but backwards.

“Without change this will continue, and obviously we do have concerns over the impact from yesterday’s CWU announcement.”

He said the dispute with the unions has stopped it enacting changes it needs to fulfil parts of its £350m cost efficiency programme, highlighting that there “is now a risk worth £100m”.

The business said other cost savings are “on track”, such as through infrastructure changes, although it also saw headwinds from Covid-19 absences.

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The latest results came a day after more than 115,000 postal workers at Royal Mail voted to strike over pay in what is expected to be the biggest industrial action to hit Britain this summer.

Royal Mail posted an adjusted operating loss of £92m for the three months to the end of June after lower volumes.

It highlighted another decline in letter demand, while parcel numbers grew by 1 per cent following a 14 per cent increase in the UK.

Nevertheless, the firm warned investors that the rest of the financial year will be affected by a “weaker parcels market”.

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Royal Mail revenues fell by 11.5 per cent to £1.88 billion over the quarter, compared with the same period last year.

Meanwhile, revenues for the Royal Mail Group, which also includes international arm GLS, saw a 5.1 per cent decline in revenues to £3bn.

Mark Crouch, an analyst at social investment network eToro, said: “To put it simply, Royal Mail is in a bit of a mess at the moment. It wasn’t so long ago that the postal service was the UK’s best-performing stock, but those days seem like a lifetime ago.

“The pandemic artificially boosted parcel volumes, which masked some serious issues in the firm’s business model, like its reliance on letters, which are seemingly in terminal decline.”

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Laura Hoy, equity analyst at financial platform Hargreaves Lansdown, noted: “Management’s distinct change in tone this quarter reflects its failure to gain union approval on this year’s cost saving targets. With inflation continuing to balloon and the labour market still tight, unions are unlikely to budge anytime soon.

“That’s left management with little choice but to grit and bear its massive cost base in the face of ever-declining volumes.”

The group also announced that it will change the name of the listed holding business to International Distributions Services “to reflect the group structure of two separate companies”.

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