Consignia cuts £1bn to stem 'crisis'

Wednesday's statement has prompted union dismay

The firm that runs the UK's post office and Royal Mail services is poised to axe hundreds more jobs in a drive to cut £1bn from costs.

A "financial crisis" at Consignia, the firm that operates the UK's state-owned postal services, has prompted the business to warn of outsourcing operations and delaying projects.

The DTI must ask how a business that was profitable for 20 years before commercial freedom was granted is now in such a financial mess

John Keggie, Communications Workers' Union

The shake-up, to be implemented by March 2003, is aimed at preventing the £8bn business moving into the red, an internal briefing paper said.

While details of job cuts have yet to announced, as many as one in ten posts in some units may go as Consignia trims its costs by 15%, a press report said.

"We want to do this with the co-operation of the unions and we will be discussing this with them over the next few weeks," a Consignia spokesman said.

Union threat

Leaders at the Communications Workers' Union said they would "vigorously" oppose attempts to impose compulsory redundancies.

"This madcap plan to slice up the industry and reduce the workforce by 15% is ill-conceived and destructive," deputy general secretary John Keggie said.

With UK postal service profits coming in £88m below target last year, and Consignia warning in the briefing paper of a "financial crisis", the union urged the government to probe the firm's business record.

"The Department of Trade and Industry must ask how a business that was profitable for 20 years before commercial freedom was granted is now in such a financial mess," Mr Keggie said.

'Crippling'

Consignia's internal memo said the shake-up followed failed efforts to tackle inherent faults in operations.

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"The levels of inefficiency in the business, despite out best efforts to control them, are crippling us," the briefing said.

"We are now living beyond our means and we need to get a grip of this now."

UK state postal services have also suffered from a history of industrial unrest, which prompted the launch of an inquiry under Lord Sawyer, the former Labour Party general secretary.

Only last month Royal Mail chiefs and the CWU agreed to extend a no-strike "breathing space" to allow talks between management and workers over "service improvements".

Rival firms

Consignia has also blamed market deregulations for hitting trade.

Last month business services group Hays won a licence to compete against Consignia in an important letter delivery market.

Consignia chiefs have complained that Hays is competing under favourable terms as it is not bound by price controls and nationwide service obligations.

"Hays can cream-skim the market by picking and choosing its customers," section managing director Stuart Sweetman said two weeks ago.

Watchdog reaction

But postal watchdog group Postwatch questioned how far competitive pressures were behind Consignia's woes.

"Competition has hardly started to establish itself," chairman Peter Carr said.

"Consignia's management should take a hard look at its past investment decisions - here and abroad - before offering excuses."

He "congratulated" managers, however, for "confronting their problems, accepting the medicine and having the courage to take tough decisions".

"We hope the medicine works and that the Post Office returns to good health," he added.

Wednesday's cost-cutting announcement comes less than three months after Consignia revealed it was laying off 2,100 staff.