Royal Mail has said it is losing £1m a day and has threatened to break up unless it achieves “significant operational change” as it faces what could be its biggest strike of the summer.
A day after the Communications Workers’ Union (CWU) announced that thousands of Royal Mail workers had voted in favor of strike action, the company said it was considering all options, including splitting its domestic and international businesses under a rebranded holding company called International Distributions Services .
In a frank statement to the stock market on Wednesday, the company revealed an adjusted operating loss of £92m between April and June. It said shipments of Covid-19 test kits and items purchased online collapsed in the quarter compared with a year earlier, contributing to an 11.5% drop in revenue along with a long-term decline in shipments of letters.
Royal Mail said it had worked to reduce its variable labor costs by reducing overtime and the use of temporary workers, but added that it had not been able to cut costs quickly enough to meet lower volumes of parcels and letters .
The company also blamed the operating loss on what it called a “disappointing performance” in achieving a more efficient business.
On Tuesday, the CWU announced the results of a vote of its postal workers’ members in a pay dispute. Almost 97% voted in favor of strike action on a 77% turnout.
The CWU and Royal Mail said they were ready to return to the negotiating table, but the union said if no deal could be reached it would notify the company of the strikes, which are expected to take place in August.
Royal Mail chief executive Simon Thompson said on Wednesday the company needed to “transform the way we work” amid growing demand for larger parcels and next-day deliveries, including on Sundays.
He told reporters that productivity had “set back” in the past three months and that initiatives previously agreed with the CWU had stalled amid deteriorating labor relations.
Royal Mail’s international parcels business, GLS, proved to be a bright spot as it reported an operating profit of £94m and higher revenue despite a fall in parcel volumes. This is due to higher prices and increased freight revenue.
The company said it wanted to make the most of its new infrastructure, including a new parcel “super hub” in Warrington, which opened in June.
However, Royal Mail said it needed to ensure it had a “more flexible and sustainable relationship with the CWU”.
“I’m more than happy to meet to talk about change and payment,” Thompson told reporters. “We need to discuss the change that will actually pay the wage. This is the change that we really need to win and compete in the marketplace and I’m absolutely ready, we’re absolutely ready to have that discussion as long as it’s about change and about pay.”
The CWU’s deputy general secretary, Terry Pullinger, said Royal Mail’s alleged 5.5% pay offer actually amounted to a 2% rise at a time of rising inflation, which last month hit a new 40-year high of 9.4% .
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Accusing the company of “sharp practices” and “dishonest behaviour”, Pullinger said he did not believe Royal Mail was making a genuine offer. “They were very economical with the truth,” he told BBC Radio 4’s Today programme [an offer of] 5.5% on the table as a direct pay deal with no limits for our members.”
Pullinger added: “They raised the price of one brand by 11% but offered a 2% wage increase to their workers. The extra money they earn that doesn’t go back into the industry won’t go back to the workers. It will go straight out the window into shareholders’ pockets.
Royal Mail said it hoped to break even in the current financial year, but this did not include the impact of possible strike action.
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