Royal Mail posts hefty losses after strike action costs group £200 million: reaction

Royal Mail has revealed that the cost of strike action in its bitter dispute with workers over pay and conditions has cost it some £200 million to date.

Parent company International Distributions Services (IDS) told investors that Royal Mail’s operating losses mounted to £295m in the first nine months of its year so far, with the group hit hard by 18 days of strikes by workers. Despite seeing six more days of industrial action than first forecast, it said Royal Mail was still set to meet guidance for annual operating losses of between £350m and £450m due to cost savings and strike contingency measures.

The group claimed that up to 12,500 union members had worked on strike days. This, together with efforts to offset walkouts by hiring agency workers, meant that more than 110 million parcels and 600 million addressed letters were delivered in December, according to the firm. Royal Mail said its outlook for the full year was based on no more strikes in its fourth quarter and on the Communication Workers Union (CWU) accepting its “best and final” pay offer. It has recently resumed talks with the CWU, but it has been a protracted dispute and the union this week launched its third ballot for industrial action.

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In its trading update, the group reported further woes in the embattled Royal Mail business, with revenue declining by 16.7 per cent in its third quarter to December 31, with letters falling 7.5 per cent and parcels down 23.6 per cent.

Matt Britzman, equity analyst at investment platform Hargreaves Lansdown, said: “It’s not usually the case that a projected operating loss of around £400m is met with a positive reaction from markets, but such is the state of Royal Mail’s parent company, IDS, this could have been a lot worse. Strike actions have plagued Royal Mail over the last year, the 18 days of strikes was six more than IDS had originally built into its guidance. Current guidance is based on no further strikes and the union accepting Royal Mail’s best and final offer - there’s no guarantee any of that happens.”

Royal Mail has seen letter and parcel volumes come under pressure amid competition and industrial action.

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