A business in need of competition or a special case?

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The Independent Online

Why is the group in such trouble?

There are long-term problems of under-investment, over-staffing and the worst labour relations record in Britain. The planned withdrawal of Consignia's monopoly on posted items under £1 has thrown the problems into sharp relief.

Management blames its present £1.5m a day losses on the fact that the Government has until now taken more than 80 per cent of its post-tax profit. The Post Office certainly used to be a cash cow – it recorded profits of around £2bn over a 20-year period, with figures of £400m and £500m as late as the mid-1990s.

What effect will competition have on Consignia?

The industry regulator, Postcomm, wants to end Consignia's monopoly on bulk post involving the mail of large organisations. In a few weeks' time, the regulator will accept applications for licences to handle bulk mail of more than 4,000 items.

Competition could mean cheaper and more efficient services. There will be less impact on householders because it is more difficult to make a profit out of such business. But some competitors might seek to sign deals with supermarkets eventually to erect postboxes. The private mail service would then empty the boxes and use the Royal Mail to deliver it.

Should Consignia face competition?

Few enterprises are protected from competition these days, but many in the company argue that the postal services are a special case. The highly profitable parts of the business – bulk mail deliveries between businesses in big cities – subsidise the less profitable parts – household postal services connecting parts of the country hundreds of miles apart. If Consignia loses the profitable parts, it will have to charge more for high-cost services, it is argued. Consumers in rural areas would then pay the heaviest price for competition.

How many jobs will go?

There will be around 30,000 redundancies over the next few years, according to management, but an additional 10,000 employees are expected to leave the company through natural wastage, such as retirement.

How reliable are Consignia services?

Fewer than 80 per cent of first-class letters are delivered the next day in some areas. However, in the last quarter of 2001, overall some 90.4 per cent of first-class post arrived the day after it was sent, compared with a target figure of 92.1 per cent. The previous quarter the figure was 90.1 per cent and in the same period in 2000 it was 87 per cent.

Will Consignia change its name?

Allan Leighton, who was confirmed yesterday as permanent chairman of the state-owned company, reaffirmed his distaste for the group's name, which was changed from the Post Office Group to Consignia last year at a cost of £1.5m. He said the name was up for review but there were more important matters to deal with at the moment.