Postal workers' strike 'may cripple small businesses'

Many small firms believe they could face severe financial problems if postal workers declare a national strike today.

The Communications Workers Union is expected to announce that a ballot of its 127,000 members shows a majority in favour of industrial action.

Royal Mail is understood to have contingency plans which could involve 7,000 managers being drafted in to run sorting offices and deliver the post. But organisations representing small businesses are concerned that many members could be badly hurt by the paralysis likely to be inflicted on the postal system.

The Federation of Small Businesses, which speaks for about 205,000 firms, said yesterday: "Our members are still very reliant on Royal Mail. Big companies can afford to use private operators, but our members cannot. We carried out a survey recently showing 69 per cent of members send their invoices through the post.

"These companies could be severely hit if payment is delayed. They often work to very tight margins and delays in receiving payment can tip them over the edge - getting a cheque on time can be the difference between life and death."

The FSB said many firms were drawing up plans to combat the strike - sending invoices out early and asking creditors to make payments directly into the bank. What is not widely appreciated is that even big banks and other major organisations which have sub-contracted their postal services out to private companies such as Business Post, TNT and DHL, will get swept up in the dispute.

This is because although private contractors collect mail from their customers - typically credit card bills and statements from banks - they rely on Royal Mail to deliver the post.

"It is a bit like BT providing the trunking network which allows telecoms operators to deliver their services," one contractor said.

One company operating a collection and delivery service is DX, which was listed on the stock market until it was taken private by Candover in a £400m deal last year. DX specialises in providing postal services for the legal profession and claims to make one million deliveries a day.

Its chief executive, John Greenbury, said: "We collect the post and deliver it so we are not affected by anything that happens at Royal Mail. In the past month we have signed up more new customers than in the rest of the year. Firms need the assurance of a postal service that will be there when they need it, particularly when it comes to delivering sensitive documents."

Royal Mail has had recent experience of how to cope with a postal strike. When workers in Belfast went on two weeks' unofficial action last year, it shipped in 50 managers to maintain the service but there was still a backlog of seven million items when the dispute ended. Firms, meanwhile, took independent action: Northern Ireland Electricity, for example, launched a helpline enabling customers to set up direct debits to pay their bills.

Privately, some Royal Mail executives believe the dispute could last up to three months.

The CWC has rejected a 2.4 per cent pay offer linked to efficiency gains. The union, demanding a whopping 27 per cent increase, fears Royal Mail is planning widespread redundancies. The company claims the union's demands, coupled with a reduction in the working week, would cost it about £1bn a year at a time when profits had shrunk to just £22m in the first half of the year.

When Sir Allan Leighton, the former head of Asda, took over as chairman in 2002, Royal Mail was losing £1m a day and 50,000 days a year through industrial action. "It was about three months from not being a going concern," he says.

There has been a dramatic turnaround but huge challenges remain, with pressure from the private sector intensifying against a backdrop of a 2.3 per cent fall in the market as more people turn to email or manage their bills and bank accounts online.

One former high-placed executive said: "Management and non-striking front-line employees will be able to handle one-day strikes without much disruption. An all-out strike will cripple the system after several working days."