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Last Updated: Tuesday, 4 May, 2004, 13:54 GMT 14:54 UK
Q&A: Financial blues at the Royal Mail
The Royal Mail is under fire again after a survey found that thousands of letters get delivered to the wrong address every month. As the company struggles to climb out of its financial pit, BBC News Online looks back on the Royal Mail's troubled times.

What's been going on then?

A litany of disasters has hit the Royal Mail's reputation. A new survey by Postwatch reckons that 14.4m letters get lost every year. Alarmingly, 60% of these are lost because postal workers put them through the wrong letterbox.

And a recent TV documentary alleging that fraud and theft took place in a London Royal Mail sorting office has led to disciplinary action against a number of postal workers.

On top of this, recent 'wildcat' strikes by Royal Mail workers over pay have eroded the public's confidence in the postal service and further plunged the Royal Mail into debt. Its most recent annual loss was 611m.

So why was it losing so much money?

Aside from the impact of last autumn's unofficial strikes, the Royal Mail was criticised for being overstaffed and inefficient.

The Royal Mail has now embarked on a three-year "turnaround" programme to cut costs and modernise itself on the road to deregulation.

Plans are underway to reduce its 200,000 strong workforce by 30,000 and introduce more efficient working practices aimed at saving 1.3bn.

What impact did this have on staff?

The whole thing riled workers and created a Catch 22 scenario.

Attempts to cut costs and introduce reforms led to strike action by workers, creating even deeper potential losses for the company.

A bitter slanging match between Royal Mail chief executive Adam Crozier and the Communications Workers' Union (CWU) made the mood even worse.

Mr Crozier blamed union activists for orchestrating recent strike action to try and force a better pay offer, leading the two sides to blame each other for intimidation and bullying.

What's next for the Royal Mail?

Thousands of companies already deliver parcels, but when it comes to letters, Royal Mail still has 99.7% of the marketplace.

But from April 2007 most people wishing to post a letter will be able to choose from a number of alternative companies.

This will bring a seismic change to the postal industry by removing the Royal Mail's monopoly and allowing competitors to try to win market share.

Deregulation is already in place for bulk deliveries, with four rival firms now able to deliver a business's mail.

To survive in an increasingly competitive market the Royal Mail has been forced to become leaner and meaner.

Are there signs of recovery?

Fortunately, yes.

Despite the crippling strike action Royal Mail looks set to make operating profits of 200m in 2004.

It has already bounced back into profit to the tune of 3m in the first half of its financial year, the first time in five years it has been in the black at that stage of the game.

Around 800 of its 1,400 delivery offices have now agreed to accept the changes, including a single daily delivery policy, which will trigger an overall pay rise of 14.5% over 18 months for 160,000 postal workers.

However, Mr Crozier has warned that future profits will be under pressure because the Royal Mail still has to find up to 150m a year to fill a looming gap in its pension fund.




SEE ALSO:
Royal Mail urges pricing shake-up
27 Apr 04  |  Business
Royal Mail sorry for snail mail
25 Apr 04  |  Business


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