Royal Mail posts profits rise but pension plan still to be delivered

Volumes continue to fall, with strikes only on hold

Royal Mail delivered what looked like impressive half-year numbers yesterday, revealing that operating profits were up 4 per cent to £184m on the same time last year.

Adam Crozier, chief executive, was joined by the Business Secretary, Lord Mandelson, in hailing the company's controversial modernisation programme, which he claimed was helping to get the business back on track.

"We have come a very long way since seven years ago when the company was losing more than £1m every working day and failing quality targets, to the position today where all four businesses within the group are profitable and – setting aside the impact of the recent strikes – quality targets are being met," Mr Crozier said.

A spokesman for Lord Mandelson's Department of Business, Innovation and Skills added: "Today's figures confirm that Royal Mail must press ahead with its modernisation plans."

However, there is likely to be little celebration. Blaming the recession, Mr Crozier gave details of a worrying drop in demand for the services offered by the group. The daily postbag averaged 72m items, down 3m on 2008, and 12m on 2006. Revenues at the group fell by £73m in the period. At the same time, Royal Mail has been hit by crippling strikes, and about 5,000 jobs have gone.

The profit is also unlikely to curry favour with the Communication Workers' Union (CWU), which last month agreed to halt industrial action over the modernisation process in return for talks with Royal Mail management. The discussions are being chaired by the former Northern Ireland parades commission chairman Roger Poole.

The crux of the dispute, which could lead to more strikes if the talks fail, has been the extent to which modernisation plans are introduced, a pay freeze and how many jobs will be lost.

"Postal workers are now working harder than ever before and we believe they deserve to be rewarded for the success they have brought to this change process which has delivered a 4 per cent increase in half-year profits," said Dave Ward, deputy general secretary of the CWU. "A pay freeze is no way to thank staff who have seen colleagues leave and workloads rise."

A potentially even bigger headache for Royal Mail is its burgeoning pension deficit, which even the company concedes is "daunting". It is expected to have ballooned to over £10bn when an actuarial review is completed in the new year. The last review, completed in 2006, showed a shortfall of £3.4bn.

A spokesperson for Royal Mail said that the group was spending £800m a year on the fund, and echoed CWU calls for the Government to take charge of the problem. Ministers seem less keen on the idea. Lord Mandelson's department introduced the Postal Services Bill in Parliament earlier this year, which would have led to it taking charge of the deficit, only to withdraw the Bill in July, blaming "market conditions". The Bill was intended to introduce reforms, including opening up Royal Mail to the private sector, and it is not clear when, or if, it will be reintroduced.

"The Government's policy on Royal Mail has been in limbo since the draft Postal Services Bill was withdrawn," said John Thurso, the Liberal Democrats' business spokesman. "Any improvement in profitability is welcome, but Royal Mail still faces many structural problems, including a decline in its core business and a pension deficit that has now topped £10bn."

Start your day with The Independent, sign up for daily news emails
election 2015The 10 best quotes of the campaign
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'