Post unions fear 30,000 cost-cutting job losses

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The Royal Mail issued a fresh warning last night of heavy job losses among its 200,000 staff after its parent company, Consignia, crashed to a £281m loss for the first half of the year.

Neville Bain, the chairman of Consignia, said the losses underlined the urgency of achieving the £1.2bn cost savings announced this summer.

Postal unions fear the efficiency drive, equivalent to taking 15 per cent out of Consignia's costs, could mean 20,000 to 30,000 job losses. The results also prompted the consumer watchdog, Postwatch, to demand changes in the company's leadership.

Consignia blames the worsening losses on slower growth in mail deliveries that had failed to keep pace with the organisation's rising costs.

The operating loss for the first six months was £100m ­ a fivefold increase on the £20m loss recorded in the same period last year. But the post-tax loss came in at £281m compared with a £113m loss last year. This year's figures included a £201m write-down at Consignia's troubled Parcelforce business and £20m of redundancy charges.

Parcelforce lost about £50m and the Counters Network of 19,000 Crown and local post offices lost about the same amount.

The Royal Mail, which was making profits of £200m a year three years ago, only just broke even. The deterioration in its financial performance was blamed on a 4 per cent rise in costs compared with a growth in mail volumes of only 2.7 per cent.

The radical cost-reduction measures include selling off Consignia's vehicle fleet, outsourcing other non-core operations and asking the 12,000 driving staff of Parcelforce to become self-employed.

Consignia has not ruled out shutting down Parcelforce altogether. Marisa Cassoni, Consignia's finance director said: "Parcelforce needs to have a much more flexible cost base because that is how the competition operates. If we can't find a viable alternative for the business there is no way we are going to ask the taxpayer or our customers to pay for it.''

Mr Bain said Parcelforce would have consumed £200m in cash by the end of this year. "This follows a decade of losses and is a position that we cannot sustain,'' he said.

The Communication Workers Union has already raised the threat of a ballot for strike action over the issue of making drivers self-employed.

But a spokesman for Consignia said the company had been given no indication that such a ballot was due to take place. He added: "We have held initial discussions with our unions to discuss the future of our parcels business."