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Commenting on the statement today from the CWU, a Royal Mail spokesman said: Print E-mail
Thursday, 14 June 2007

"The company’s position is very simple - Royal Mail has absolutely no option but to change and modernise the business, urgently. That involves a £1.2 billion investment in the business - the opposite of the ’cost-cutting frenzy’ the union talks about and it is designed to ensure Royal Mail can compete successfully in an increasingly tough market.

"We wrote to the union last week after the ballot result was announced offering to meet at any time to explain the company’s position - and we remain very willing to meet the union at any time to do so."

Letter to MPs and peers:

I am writing to update you on the latest position with regards to potential industrial action within Royal Mail and to ensure that you have all the facts surrounding the current dispute.

Over the last 18 months we have held a number of strategic meetings with the CWU to try to engage with them on the future of the Royal Mail and to ensure that they properly understood the commercial realities we face in an open and increasingly competitive market. During the same period we constructed a commercial business plan which has been scrutinised by a number of investment banks and which resulted in our shareholder - the Government - investing £1.2 billion in the Royal Mail letters business to help us modernise, improve our efficiency and therefore enable us to compete. We have discussed our modernisation plans at length with the union and are now embarking on a series of briefings to explain the plan to our people.

In addition to the investment - which takes the form of a commercial loan - the shareholder also allowed us to set aside £1 billion for the protection of our peoples’ pensions. This is a huge infusion of taxpayers’ money at a time when there are many other calls for investment across the country and, as anything other than a commercial loan would be illegal, we are responsible for ensuring that it provides a proper return for the shareholder.

Against this backdrop the union submitted in writing a pay claim amounting to 27% made up of basic pay and a reduction in the working week. This deal would cost us around £1 billion per annum at a time when our half year profits amounted to £22m. Clearly this is unaffordable.

We have offered a package of pay which gives a basic pay rise of 2.5% for change as well as an £800 dividend if we hit our targets - plus the opportunity to earn a 50:50 share of any savings over and above budget. A similar offer made to colleagues at Parcelforce has been recommended by the union and accepted by our people. This is a very fair offer from the company which is well in advance of public sector rises. It is also despite the fact that our new competitors pay around 25% less than we do (some are having a pay freeze this year) and comes after a 4 year period during which we have improved our peoples’ basic pay by around 25%. Our people in Royal Mail letters have not had the chance to vote on our pay offer.

We do not believe the dispute is about pay. The CWU have on many occasions made it clear that they do not believe we should have to pay back our commercial loan from the government, in spite of the fact that there would be illegal state aid issues, and that competition should be stopped - which is clearly impossible because many large multinationals have already invested heavily in the UK market. The union is also asking for our very large pension deficit to be guaranteed by the Government and therefore the taxpayer. For all these reasons the CWU are against the business plan and the modernisation programme even though we are rapidly losing business precisely because of our lack of competitiveness and the fact that our major rivals have already invested in the way we now plan to do.

We have already lost around 40% of our bulk mail business to the competition.
The mails’ market is shrinking by 2.5% per annum as consumers and businesses continue to change the way they communicate - whether by email, broadband or even text.
Our competitors are 40% more efficient than we are, not because their people work harder than ours, but because they have already invested in modernising and automating their operations.
The bottom line is that if we want to be competitive so that we can retain and win business and secure our future, then we have no option but to modernise.

The union balloted 127,000 people to support it in taking strike action over pay, conditions and the business plan. More than 66,000 people voted for strike action - that’s around half the number balloted and excludes more than 20,000 of our people who are not union members. Because the union have clearly balloted for strike action, under the new laws that is the only action they can take and so we believe that it is inevitable that there will be protracted industrial action over the summer.

This is clearly not a "cost cutting frenzy" as the union describes it - but in fact entirely the opposite. We have a long term business plan in which £1.2 billion pounds of public funds are being invested to ensure the long term health of a company which matters to every business and person in the UK. That plan is supported by a huge investment in our people which will ensure that, as the company becomes more efficient and successful, they share in that success. This is illustrated not just by the pay deal on offer but through the "ColleagueShare" scheme we have launched which allows each of them to earn up to £5,300 over the next 5 years - as well as the plans we have to invest in training our people to ensure we continue to deliver the best quality in the market.

So our strategy is clear. Our vision is simple: to help the nation thrive and grow by connecting people with people, and connecting businesses with their customers.

We firmly believe that this will be achieved by:
• Maximising profitable revenue through innovative new products.
• Winning this revenue by using our scale to become the lowest cost operator with the highest quality of service.
• Achieved through world class productivity - enabled by a £1.2 billion investment in a modern automated environment.
• Delivering all those things through engaged and flexible people who have the right equipment to do the job.
• Moving to a regulated environment that allows us to compete on a level playing field where the universal service obligation is limited to stamped mail where there is little or no competition while allowing Royal Mail to compete successfully in the wider business communications market place where our rivals are not just other postal businesses but also the internet, television, newspapers and magazines, and other advertising channels

We are listening to our people. But this is not a popularity contest. The only thing that matters is the future of the Royal Mail. You will all be aware of the many examples of companies that have gone into long term decline by not facing up to the fact that if you are more expensive than the competition, people will take their business elsewhere.

We know that the next few years will be difficult and at times painful. Modernisation and automation in the business means that more jobs will go - and we have always been very open about this - but in the long run it will ensure that we transform the business and ensure that we can compete to win the business we need if we are to thrive.
It is also the only way that we can continue to afford this pay deal, continue to offer generous VR terms, support an affordable defined benefits pension scheme and reward our people through the new ColleagueShare scheme.

Finally, I have enclosed for your records a copy of the letter we have sent to the CWU explaining our position and why we cannot change our position as well as clearly offering to meet them to go through the detail of this at any time.

Kind regards

Adam Crozier
Chief Executive
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