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Last Updated: Friday, 31 March 2006, 09:42 GMT 10:42 UK
Royal Mail wants shares for staff
Postman emptying letterbox
All 165,000 postal workers could be in line for a windfall
Royal Mail chiefs have asked the government to give postal workers a stake in the company.

They have made a formal request to the Department of Trade and Industry to transfer up to 20% of Royal Mail shares to a trust account for employees.

The plan could see Royal Mail's 165,000 staff given an equal amount of shares, with an estimated value of 6-7,000.

Union leaders are concerned that the move would be a precursor to privatisation, which they oppose.

Detailed negotiations

Chairman Allan Leighton believes that giving workers a stake in the business is vital to improve the performance of the company.

In a statement, the company said giving workers a stake would "reinforce their commitment to the challenges posed by competition" and "reward them for future success".

The DTI said the government was not looking to privatise Royal Mail, but said it was not ruling out "options to increase worker involvement, including an employee stake".

Transferring shares would involve enacting new legislation and the government is thought to be reluctant to hand over such a big proportion of Royal Mail to staff.

"I suspect there will now be a detailed negotiation between the DTI and the Treasury and Royal Mail," said the BBC's business editor, Robert Peston.

"My own view is that there will be a transfer of shares into the trust, but it will be less than 20%."

Pension deficit

Royal Mail is a public limited company, but all its shares are owned by the government.

Because they are not listed, it is thought that any shares transferred to staff would be held in some form of "shadow trust".

The shares could not be transferred to non-employees, but staff would be allowed to sell them back at a profit to the company if they left.

"This is a step towards privatisation," said Mr Peston.

"Once you have given shares to employees, they work out that those shares would be worth a lot more if the company was floated on the stock market, which then builds up momentum towards privatisation."

However, there is a question as to exactly how much any shares in Royal Mail should be worth.

The company has a huge pensions deficit that has been estimated at 4-6bn and has asked the government for a cash injection of 1bn to help it deal with this.

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