Approval granted for £3.6bn acquisition of Royal Mail by Czech billionaire
In a significant move, the takeover of International Distribution Services (IDS), the owner of Royal Mail, by a company owned by Czech billionaire Daniel Kretinsky has been approved. However, the deal has sparked concerns about potential negative impacts on the company’s finances, workforce, and its Universal Service Obligation (USO).
The USO, which mandates Royal Mail to deliver mail six days a week to all 32 million UK addresses at a fixed price, is at the heart of the controversy. Critics argue that the term "USO reform" could be a euphemism for plans to weaken this obligation, saving around £300 million. This, they claim, would likely degrade service quality and reduce delivery standards, undermining Royal Mail’s public service role.
The takeover is also associated with a restructuring agenda aimed at transforming Royal Mail into a parcel-led logistics business. This shift risks job losses, pay cuts, and deterioration of working conditions for the 130,000-strong workforce. There is also concern about asset-stripping and profiteering behind the deal.
Royal Mail’s main union, the Communication Workers Union (CWU), initially opposed the takeover due to fears of cuts but later dropped opposition after assurances and representation on advisory committees were promised. However, postal workers express unease about ongoing “pilot” changes and infrastructure adjustments that suggest preemptive cuts to services and jobs, even before formal regulatory approval.
The takeover marks the first time Royal Mail is under foreign ownership, raising questions about long-term commitments to the UK. Although the UK government holds a “golden share” with veto power over certain decisions, it lacks voting rights or economic influence, causing skepticism over how much real protection this offers.
Despite these concerns, there are potential positives to the takeover. The restructuring of the USO for second-class mail could potentially improve Royal Mail’s infrastructure and financial performance. Staff will also have a greater say in how the company is run through a new workers' group that will meet with bosses once a month.
However, the underlying decline in the number of letters sent will continue to put pressure on Royal Mail. Susannah Streeter of Hargreaves Lansdown states that while shareholders still need to vote on the takeover, any opposing shareholders would have already expressed their dissatisfaction. The state will retain a "golden share" in IDS, allowing it to approve changes to Royal Mail's ownership, tax residency, or headquarters.
In summary, while the takeover offers potential benefits, there are valid reasons to be sceptical about its impact. The concerns revolve around the potential weakening of the group's finances, the impact on workers, the degradation of public service standards, and the stability under foreign ownership—despite formal commitments to maintain key obligations and a governmental “golden share” safeguard.
- The newsletter from the Communication Workers Union (CWU) this week highlighted concerns about the long-term impacts of the takeover of Royal Mail, including potential weakening of the Universal Service Obligation (USO), job losses and pay cuts, and asset-stripping.
- The personal finance implications of the Royal Mail takeover are a hot topic, with critics arguing that proposals to reform the USO could save around £300 million at the expense of degrading service quality and reducing delivery standards.
- In the world of investing and business, the takeover of International Distribution Services (IDS), the owner of Royal Mail, by a company owned by Czech billionaire Daniel Kretinsky has raised concerns about the future of dividends from Royal Mail due to the potential negative impacts on the company’s finances and USO obligations.
