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UK plans Royal Mail sell-off

Sep 10 2010 14:46 Reuters

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London - The British government said on Friday it planned legislation this year to privatise state-owned postal delivery company Royal Mail, despite opposition from trade unions.

The commitment came following an updated independent review of the sector conducted by former regulator Richard Hooper who said that private sector capital was required to help ensure the survival of the service.

"He (Hooper) paints a very clear picture - Royal Mail is facing a combination of potentially lethal challenges - falling mail volumes, low investment, not enough efficiency and a dire pension position," Business Secretary Vince Cable said in a statement. "We will come forward with new legislation in the autumn. It will draw heavily on Hooper's analysis and recommendations and the Government's wider objectives, including the need for employees to have a real stake in the future of the business."

Hooper said that letter volumes were likely to fall by up to 40% over the next five years because of increased use of e-mail and texting.

The Royal Mail's accounting pension deficit had increased to £8bn as of March this year, and Hooper said that deficit should be taken over by the "public purse."

The mail service has faced increasing pressure from competitors such as UK Mail and TNT which deliver parcels and packages. TNT was seen as a potential purchaser under previous plans to sell off Royal Mail.

The previous Labour government had planned to sell off up to 30% of Royal Mail but shelved the plan last year, citing market conditions. Strong union opposition had also been seen as a factor in the move.

The Conservative-Liberal Democrat coalition, which took office in May, included a sell-off as part of its coalition agreement. It says it will seek to allow employees to take a stake, but has not specified how much of Royal Mail it is planning to sell off.

Billy Hayes, general secretary of the Communications Workers Union, denounced the government plan for an organisation that employs around 155 000 people.

"Privatisation is old politics. It's the failed politics of history which brought disruption to Britain's utilities and railways and astronomical prices for consumers," he said.

"Privatisation would be devastating for Royal Mail and the whole country's postal services," he added.

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