Royal Mail's hopes of putting its strife-torn industrial relations record behind it and returning to profit this year were dealt a blow yesterday after a key group of postal workers voted to strike over pay.
Postmen in Royal Mail's London division voted by an overwhelming majority on a 68 per cent turnout to take industrial action in a dispute over London weighting.
The mood of union militancy was heightened when a left-winger, David Ward, was elected as deputy general secretary of Royal Mail's main union, the Communications Workers Union, in succession to the Blairite moderate John Keggie. Mr Ward will join the general secretary, Billy Hayes, in forming a new militant leadership of the postal workers' union.
The strike vote by 30,000 London postal workers took the shine off Royal Mail's announcement that losses last year halved to £611m while the number of strike days fell by 90 per cent to the lowest level in a decade.
The company also unveiled a £4.6bn hole in its pension fund which will force it to end its contributions holiday and start pumping £100m a year into the scheme.
Adam Crozier, the company's new chief executive, said he was confident that Royal Mail could move into profit in the current financial year. The former Football Association boss added that he has been "hugely impressed by the pride and commitment of our people" since arriving at Royal Mail in February.
The £611m loss for last year compares with a £1.12bn loss for 2001-02 and was struck after £697m of exceptional items, the biggest element of which was a £449m charge for redundancies. The workforce fell by 16,600 and is due to shrink by a further 17,000 by 2005 under Royal Mail's three-year recovery plan.
At the operating level, Royal Mail cut its losses by 38 per cent to £197m - the first improvement in the group's trading performance in five years. Losses in the counters business, Post Office Ltd, rose by £31m to £194m while Parcelforce Worldwide's losses doubled to £187m, but the core UK mails operation made a profit of £66m.
Allan Leighton, Royal Mail's chairman, said the reduced operating losses showed that the organisation has "stopped the rot", but he cautioned that the really hard work lay ahead if it was to achieve the planned operating profits of £400m a year by 2004-05.
The strike vote in pursuit of a £4,000 increase in London weighting was passed by a 99.5 per cent majority. Although the ballot was considered to be unofficial by the union, the national leadership will come under intense pressure to take the deep discontent onboard.
An emergency motion calling for an official ballot on industrial action in London will now be put before the union's annual conference in Bournemouth at the beginning of June.Reuse content