Updated: 07/11/2013 00:38 | By Agence France-Presse

Britain to part-privatise Royal Mail in stock market float

Britain on Wednesday announced plans to privatise more than half of Royal Mail, the state-run postal delivery service, following a major restructuring in recent years triggered by fierce competition from email.


Britain to part-privatise Royal Mail in stock market float

The Royal Mail delivery office in Fleet, on December 16, 2008. Britain on Wednesday announced plans to privatise more than half of Royal Mail, the state-run postal delivery service, following a major restructuring in recent years triggered by fierce competition from email.

Business Secretary Vince Cable confirmed to parliament that the coalition government planned to "dispose of a majority stake" via a flotation on the London Stock Exchange, with 10 percent of Royal Mail shares handed out to its employees for free.

Royal Mail was expected to be the biggest privatisation since the unprecedented sell-offs in the 1980s such as British Gas and British Telecom.

Cable, a member of the Liberal Democrats which share power with Prime Minister David Cameron's Conservatives, said the government would seek an initial public offering (IPO) by the end of the current financial year that ends next March.

"This is logical, it is a commercial decision designed to put Royal Mail's future onto a long term sustainable basis," Cable told parliament.

"It is consistent with developments elsewhere in Europe where privatised operators in Austria, Germany and Belgium produce profit margins far higher than the Royal Mail but have continued to provide high quality and expanding services."

He argued that partial privatisation would allow Royal Mail the freedom to raise capital, continue modernising and meet booming demand for online shopping delivery.

 Cable added it would also help "secure the universal postal service -- the six-day-week service, at uniform and affordable prices to all 29 million addresses in the UK, which is vital to the UK economy".

Around 150,000 staff would be eligible to get a free stake in the business under Britain's largest employee share scheme of any major UK privatisation for almost 30 years, he said.

However, the Communication Workers Union (CWU) responded that it would explore strike action unless a deal on employee terms and conditions could be agreed with the eventual new owners.

"I really do not understand what the government are trying to achieve by this," said CWU deputy leader Dave Ward.

"If you think about the profits the Royal Mail are now making, there's no need for it to be privatised. What privatisation will do is destroy the UK's universal postal service.

"There's no way private companies can maintain six-day-a-week deliveries to every single address in the UK."

Reports suggest that the government plans to keep a 49-percent holding, while Cable stressed that the government would "retain flexibility" around the size of stake to be sold.

Royal Mail has recently enjoyed a surge in annual profits thanks to the increasing popularity of online shopping which generates parcel traffic, and owing also to deep cost-cutting and big increases in stamp prices.

Media reports say the part sale of Royal Mail could worth up to £3.0 billion ($4.5 billion, 3.5 billion euros). The government previously said that it would take on Royal Mail's historic pension deficit.

The coalition government relaunched plans to part-privatise Royal Mail three years ago and after the proposal was ditched by the former Labour administration.

Former prime minister Gordon Brown's Labour government scrapped the sell-off plans in 2009 as Britain struggled with recession following the global financial crisis.

But Royal Mail recently announced that its profit after tax soared to £566 million in 2012-13 compared with a net gain of £149 million during its previous financial year. Revenue grew almost 6.0 percent to £9.279 billion.

Royal Mail continues to operate most British postal services even though its more than 350-year-long monopoly of the letter-delivery business ended in 2006 as new rules kicked in to allow rival operators.

While Brown's Labour government was seeking to offload a big chunk of the Royal Mail, it was also forced to nationalise or rescue several major British banks at the top of the global financial crisis in 2008.

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