Royal Mail said it may have to cut up to 10,000 jobs next August, blaming strike action by its workers and the continued decline in its core business.
In an unscheduled trading update a day after Royal Mail workers staged a 24-hour strike over pay and conditions, its parent company International Distributions Services said thousands of roles at Royal Mail are to go in due to the damage and interruptions caused by the industrial action, since as well as the decrease in the volume of packages.
Royal Mail said it expects to make an annual operating loss of around £350m in the year to the end of March 2023. It said that could rise to £450m if customers turn to rivals due to interruptions of its delivery services.
The company said it was looking to cut up to 6,000 full-time frontline jobs in delivery and processing by the end of August next year.
Overall, Royal Mail said it is looking for an overall reduction of 10,000 full-time equivalent (FTE) roles over the same period and said there could be more if new strike dates are announced. This includes reducing overtime, temporary staff roles and not filling roles when employees leave the company. In total, Royal Mail employs around 140,000 people.
“We will begin the process of consulting on the suitability of the business in response to the impact of industrial action, delays in the delivery of agreed productivity improvements and lower parcel volumes,” the company said. “Wherever possible, we will look to redistribute FTE through reductions in overtime, temporary staff and natural attrition.”
It is the latest move in the bitter dispute between Royal Mail and the Communications Workers’ Union (CWU). The union accuses the company of planning structural changes, which would effectively transform employees in secure, well-paid jobs into an “informal and economically precarious workforce overnight.” The company says it needs to modernize to make the service more productive and competitive.
In response to the job cuts announcement, the CWU called for an urgent meeting with management and accused Royal Mail of holding onto postal workers to bail out and turning the company into a “economy-style parcel post “.
“The CWU is calling for an urgent meeting with the board and will present an alternative business plan at that meeting,” said Dave Ward, the CWU’s general secretary. “This announcement is holding postal workers to the rescue to take legal action against a business approach that is not in the best interests of workers, customers or the future of Royal Mail. This is no way to build a business.”
Royal Mail said eight days of industrial action had taken place or been notified to the company by the CWU, with a further 16 days of potential strike action planned for November and December.
“If they occur, the loss for the full year would increase materially and may require operational restructuring and workforce reduction,” the company said. “We will also continue to push for talks with the CWU at Acas, which must be limited in time, as the damage from further strikes will only require further changes to the business, beyond those already announced.”
Royal Mail, which said it could not give a “clear outlook” for the full year due to the disruption to its business, added that its poor financial position meant it could not afford to pay the historic layoff package of up to two years’ salary to staff.
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Shares in its parent company IDS fell 10% on Friday, becoming the biggest faller on the FTSE 250.
Royal Mail’s international parcels business, GLS, has proved to be a bright spot and is on track to meet market expectations of a profit of between €370m and €410m for the full year.
However, Royal Mail said profits from this arm of its business should not be used to prop up its UK operations.
“The board has always maintained that there should be no cross-subsidy in the group and recognizes the need to address improvements in Royal Mail’s performance quickly,” the company said. “In the event that significant change is not achieved at Royal Mail, all options remain open to protect the group’s value and prospects, including separating the two companies.”