Paula Vennells interview: Post Office chief banks on financial services in the digital age

The Post Office's core services hark back to a previous age

Can a 370-year old organisation balance the need to be both community-minded and avowedly commercial? And what if that organisation is the Post Office - forever associated with habits like sending letters in an age when email is killing them off?

Paula Vennells, the Post Office’s chief executive, thinks it’s do-able. “If you can sell something to somebody that they actually need, then it is a service,” says Vennells. “If you are trying to push it on them and they don’t need it, then it’s an appalling sale and it just doesn’t work.”

The first thing to note about the Post Office is that there are a still lot of branches: 11,500 across the UK. The next is that anything post-related is only a small part of its future. The biggest opportunity is to turn it into a challenger bank, just as the biggest lenders are itching to close more branches. At the same time there is the challenge of keeping busy a loss-making chain that in some towns and villages is the last retailer standing.

So it’s been a tense three years for Vennells – 56-year-old veteran of the high street having previously spent time at Lunn Poly, Argos and Costa – since she took the top Post Office job three years ago. Trade unions called strikes to oppose a programme of cuts and closures. Many franchised branches have been relocated into supermarkets, petrol stations – and in one case a chiropodist – to save money. Long-serving sub-postmasters who didn’t buy into the reorganisation plan have gone. Now the closures have ended and so have the strikes, but the loss of people with decades of service concerns Vennells.

“I do worry about it actually, when you have got people who have been with the business a long time. There is a thing called corporate memory and it is very important to me that we hold on to that.”

Newcomers are being carefully trained, and staff brought out from behind the counter in overhauled branches. As if to emphasise its new approach, the Post Office has just changed chairman: swapping Civil Service veteran Alice Perkins for Tim Parker, the curly-haired private equity guru who tore through the Automobile Association and Kwik-Fit.

In the Post Office’s new open-plan headquarters tucked away next to the Square Mile towers that house high-flying lawyers and financiers, Vennells has three years to reduce losses to a manageable level as the state subsidy is gradually wound down.

The Post Office was given its freedom in 2012, when it was split from Royal Mail. The Government could not have done more to help Royal Mail’s cause, hiving off its troublesome pension liability on to the taxpayer and sanctioning a hike in stamp prices and lighter regulation so it could make its way onto the stockmarket. The Post Office has not had it so easy.

“Yes if you take tax discs [scrapped by the Chancellor] for instance there are shocks you get occasionally in a business like this,” Vennells concedes. “Government isn’t necessarily joined up so different departments take different decisions. You cannot sit here and feel a victim.”

It is a theme she warms to. The Government has been a supportive shareholder but “it is difficult to go to one place and say here are some things the Post Office can do. I could spend a huge amount of resources courting different departments across government to try to get work when actually there is an awful lot of stuff we already do that we could do more of and better.”

Footfall has been gradually falling for five years or more, but still 17 million people visit the Post Office every week. The organisation has calculated that people still need some physical contact in the digital world. Behind parcel collection and despatch – on the rise with all that online shopping – it is the main provider of the Government’s digital identity system Verify, which users need to access universal credit and tax self-assessment. Ironically, Vennells’ big ambition is that the company does more to help the Government’s digital agenda. That might ultimately give people less cause to come into its branches.

But the big opportunity is in banking. National Savings and Investments (NS&I) has just ended its 156-year relationship by withdrawing premium bonds from sale over the counter. Unperturbed – and already big in travel money – the Post Office is now selling home loans, savings accounts and insurance, mainly from the Bank of Ireland. It has three million financial-services customers and aims to get to five million in the next five years.

“Frankly, I would rather sell a mortgage than a premium bond,” Vennells says. From the end of the year the Post Office should have an agreement in place that lets customers of all the major banks use its branches to conduct their business.

“For the Post Office, part of what we are discussing with the banks is how we get remunerated because clearly it becomes a little one-sided if they are closing banks, reducing their staffing and shop costs and we are continuing to provide that,” she says. If it all goes to plan, the Post Office will be mutualised, but it must prove it can become commercially sustainable first.

“We are probably talking towards the end of this current Parliament if the current Government decided they wanted to carry on with it.” And how would it be structured?

“The view is that customers might take a share, I would certainly hope postmasters would and company colleagues too. Our view is that the Post Office is so important to communities, if you are going to mutualise it you probably want to tie them in.”

There are signs it is moving in the right direction. The state subsidy fell from £210m to £130m in two years, in sight of the annual £50m-£80m ongoing prop that Vennells has negotiated to support the uneconomic 3,500 community branches. The 320 crown post offices the group directly owns might actually break even this year – for apparently the first time.

“This is the most stable the Post Office network has been for 25 years,” she insists. “I really do understand because people don’t want to change. It worked very well in the past when it was fully subsidised. That simply isn’t an option. It is a business that I care hugely about and so I listen when people say those things and I reply to as many emails as I can.”

Vennells grew up outside Manchester, her father an industrial chemist, her mother a bookkeeper. She won a funded place at the independent Manchester High School and might have become a translator after studying languages at university, Instead she chose a business path.

A retail career led her to the Post Office nine years ago, where her first job as network director was to shut 2,500 outlets. Sounds ruthless, so how does it square with being a part-time Church of England curate, who preaches near her home in Bedfordshire most Sundays? “It is a difficult one,” she says, before checking herself. “Actually it is not difficult at all, but I think it is sometimes difficult for other people looking in.

“My faith does not write the strategy. What my faith does is motivate me around how I deliver it. There is something around Christianity about being the best you can possibly be. If you can get everyone to work in that way you are bound to do your best for the organisation. It doesn’t mean to say you don’t take tough decisions.”

Life and times

Education: Manchester High School for Girls and then a degree in Russian, French and economics from Bradford University.

Career so far: Joined the Unilever graduate scheme in 1981. Moved to L’Oréal, and then Dixons Retail when it launched internet service Freeserve. At Argos, she was involved in the first click-and-collect service, and then spent five years at Whitbread, rising to group commercial director. Joined the Post Office in 2007 as group network director, becoming chief executive in 2012.

Personal: Married with two sons, aged 19 and 17. Her husband is a global vice-president at engineer ABB. They live in Bedfordshire. She relaxes by going to church, cycling and skiing.