A Czech billionaire is buying the Royal Mail. What’s next for the iconic British institution?

The Royal Mail has accepted a take-over bid from a Czech billionaire, ending 500 years of British ownership.

The postal service is one of the UK’s most iconic and oldest national institutions.

But campaigners and unions fear job losses after International Distribution Services – the company which owns the loss-making postal service – accepted a £5bn takeover from business tycoon Daniel Křetínsky.

The Royal Mail has endured a turbulent decade since it was privatised in 2013. A sharp drop in service demand and management failings contributed to a £348m loss in the year to March 2024.

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Unions fear that the new takeover could lead to job losses – and to a reduction in the six-day per week service.

Dave Ward, general secretary of the Communication Workers Union said the takeover was “a direct result of a failed and ideological privatisation over a decade ago mixed with the blatant mismanagement of the company in recent years”.

The new offer reportedly includes protections for employee benefits and pensions, and commitments to retain the name, brand, UK headquarters and UK tax residency of the Royal Mail.

But many of the company’s 150,000 employees have lost trust in management, Ward said.

“We do welcome some of the commitments that have been made but the reality is postal workers across the UK have lost all faith in the senior management of Royal Mail and the service has been deliberately run down,” he said.

At a conference last month, the CWU passed “emergency motion”, pledging to oppose franchising, outsourcing and cuts to services “in the event of any takeover”.

But the new takeover could very well threaten these assurances, warned Johnbosco Nwogbo, lead campaigner at We Own It.

“I don’t think that there’s been any assurance that the new company that’s taking it over is not going to do those things,” he told the Big Issue.

“This takeover is driven by the desire for profit. So how can they say those things are off the table? This takeover is almost happening in the dead of night, because everyone is thinking about the election.”

We Own It called for the deal to be blocked until after the general election. They want the government to renationalise the service.

“We shouldn’t allow such valuable public assets to be used as the playthings of private equity companies,” he said.

When was the Royal Mail privatised?

The Royal Mail was founded in 1516 by Henry VIII. Initially intended to manage royal communications, it eventually expanded into a national postal service.

For most of the ensuing five centuries, the service was managed by the crown, and then by the state.

All that changed in 2011, when the Conservative-Liberal Democrat coalition privatised 90% of the company with the Postal Services Act.

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Two years later, the government floated 60% of its Royal Mail shares on the stock exchange – a move opposed by 96% of Royal Mail staff. The government then sold its remaining stakes in October 2015.

Currently, the Royal Mail is part of International Distributions Services, which also contains General Logistics Systems and Parcelforce. Křetínský already owns a 27.5% share.

“The privatization of the service was meant to fix a big problem – people sending far fewer letters,” Nwogbo said. “It was meant to bring in a whole bunch of technology and new techniques, in order to make it profitable while they continue to deliver a universal service provision.”

However, long-term pressure from shareholders – who want to make more for their investments – has seen service quality decline. Delivery offices and capacity have been cut, while prices rice.

The cost of a first-class stamp has increased by almost 50% in just five years.

“The Royal Mail is supposed to keep Britain connected. The profit motive is distant from that principle, because there is an incentive to cut costs and reduce services so that shareholders can continue to profit,” he said.

“Profit from the Royal Mail – like from sending parcels – should go back into the Royal Mail, to make up from the loss from delivering to the more far-flung parts of the country.”

In 2021, investors were paid £400m in dividends. And even though the company made a half-year £319m loss in 2023, shareholders in parent company IDS have nonetheless been promised a “modest” dividend.

Regulator Ofcom recently warned that the Mail could become “financially and operationally unsustainable in the long term” unless it is allowed to stop delivering letters six days a week (the ‘Universal Service Obligation’).

Both the Tories and Labour have rejected this suggestion for now. But it could become a reality under increasing shareholder pressure, Nwgobo said.

“The motivation is not to improve the service, but to make profit. The profit comes from labour manoeuvres and it could soon come from downgrading universal service obligations,” he added.

We Own It want the government to block the sale of the Royal Mail, and to bring it back into public ownership.

It’s a long shot, with neither major party expressing interest in the policy. But the public demand is there, Nwgobo insists, with 68% of people backing renationalisation.

“We won’t give up. The government have U-turned on many other things,” he said. “We will mobilise people to make that demand – that Royal Mail should be in public ownership, and it should fulfil the purpose for which it was founded. That is keeping us connected, not enriching shareholders.”