Royal Mail set for share flotation

10 July 2013 Last updated at 08:00 ET

Business Secretary Vince Cable has confirmed that the government will sell Royal Mail through a flotation on the London Stock Exchange.

Mr Cable told MPs that employees would be given 10% of shares for free, and the public will be able to buy shares.

The sale is likely to value the business at £2bn-£3bn.

Members of the Communication Workers Union (CWU) are overwhelmingly opposed to the privatisation, and have threatened strike action.

"Now the time has come for the government to step back from Royal Mail," Mr Cable said.

He said employees should take a stake in the business and described plans to give postal workers free shares in "the biggest employee share scheme for nearly 30 years".

Selling shares on the stock market has been chosen over selling off the business to a private operator.

Companies such as TNT and DHL had been suggested as possible buyers.

Speaking earlier on BBC Radio 4's Today programme, Business Minister Michael Fallon said the time was now right to "free up" Royal Mail and give it access to private capital that would allow it to grow.

"It's been turned round in the last two or three years, and it's ready now to be a successful commercial business," he said.

Strike warning

Royal Mail is revamping its business in order to focus less on the delivery of letters and more on parcels, following the rapid growth of internet shopping.

A boom in parcel delivery helped Royal Mail to more than double its profits last year, after many years of losses.

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Unlike the great privatisations of the past, of the gas, electricity and telecoms industry, there will be no aggressive attempt to sell the shares to individuals - there will be no campaign such as the famous 'Tell Sid' adverts of the 1980s for the flotation of British Gas"

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Royal Mail staff may be in line for a windfall if the government opts to give postal workers 10% of shares at a discount or for free, as part of the share sale plan.

But a spokesman for the CWU said on Monday that postmen were "deeply suspicious" of the idea of a share scheme.

In a letter to Mr Fallon, the union warned that if the government did not think again about the privatisation, then "the threat to terms and conditions of postal workers will inevitably lead to strike action".

CWU general secretary, Billy Hayes, said: "Nobody outside of government and their potential investors wants their postal service sold. The public consistently oppose the sale and recently 96% of workers voted against."

'Unresolved issues'

The CWU represents about two-thirds of Royal Mail's 150,000 workforce.

The flotation is likely to be one of the biggest since large utility companies such as British Gas were privatised in the 1980s.

Dave Ward, deputy General Secretary of the Communication Workers Union

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Dave Ward, CWU: "If you bring in private owners to Royal Mail they will change the priorities of the company"

It will not include the Post Office. The two are separate companies with independent boards.

The Royal Mail sorts and delivers letters and parcels, while the Post Office is the national network of branches that offer postal, governmental and financial services. The Post Office itself is not for sale.

The sell-off of Royal Mail is not a big surprise - the government enacted the necessary legislation through the Postal Services Act 2011. The idea was first mooted under the last Labour government.

Chuka Umunna MP, Labour's shadow business secretary, said the government was pushing ahead with the privatisation simply to "dig the Chancellor, George Osborne, out of a hole of his own making".

"There are still huge unresolved issues around competition, and ministers haven't said how much capital they expect the business will be able to raise after privatisation or how the proceeds of the sale will be used," he said.

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