2.10.13

The privatisation of the Royal Mail


Brought to you by our friends at Freshfields Bruckhaus Deringer LLP

Having provided over 497 years of service, the Royal Mail is undergoing one of the biggest changes it has ever experienced. The coming weeks will see the iconic British service floating on the stock market, in a move that many thought would never happen.
For much of its history, the Royal Mail has been under government ownership. However, after the passing of the 2011 Postal Services Act, it was decided that the institution should move to the private sector, with over 90% of the company becoming privatised.
Speaking of this move, business secretary Vince Cable commented in his Commons statement; "The government's decision on the sale is practical, it is logical, it is a commercial decision designed to put Royal Mail's future on a long-term sustainable business.”
While the government insists this is the right move for the Royal Mail, the proposed changes have met fierce opposition across Britain. Delivering to 29 million UK homes, many are worried that such privatisation will affect the quality of service, a particular concern during the run up to Christmas. In addition, many fear that the already high cost of services will continue to soar as a result, in order to increase shareholder profits. Job losses are another concern, as privatisation often results in the shedding of employees in order to lower costs.
In a bid to soothe worried employees, Royal Mail has guaranteed free shares for their employees after its privatisation. This did little to numb the pain, with 96% of postal workers voting against the changes in a ballot ran by the Communication Workers Union.
However, some are in favour of the changes. It has been no secret that the Royal Mail has been struggling of late, with the advent of more affordable competitors like Parcelforce and UPS. Many welcome the change in order to preserve the legacy of the British institution.   
At the moment, it is difficult to tell how the privatisation of the Royal Mail will go. If you would like to find out more about financial law and the privatisation of companies, Freshfields is a great starting point.
Thousands of companies, like Toys ‘R’ Us and H.J.Heinz, have successfully moved from the public to the private sector so hopefully Royal Mail will follow suit, continuing the postal service’s impressive British legacy.

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