UK’s Royal Mail cuts 2,000 jobs as letters business fades
Covid-19 sparked a jump in demand for parcel delivery, but ramping up its poor parcels infrastructure saw costs rocket
London — Britain’s postal operator Royal Mail, whose workers have helped the nation cope with the coronavirus lockdown, said on Thursday that it will axe 2,000 management jobs.
The former state-run company revealed a cost-cutting overhaul in its annual results that showed the Covid-19 pandemic had sparked a jump in demand for parcel delivery. Royal Mail, however, continued to suffer from a slump in its core letters business.
“In recent years, our UK business has not adapted quickly enough to the changes in our marketplace of more parcels and fewer letters,” Royal Mail’s executive chair Keith Williams said in the earnings statement. “Covid-19 has accelerated those trends, presenting additional challenges.”
Williams, a former British Airways CEO, is heading Royal Mail on a temporary basis after the sudden departure last month of controversial CEO Rico Back.
Back’s exit after less than two years in the role came after union bosses accused the company of being slow to provide protective equipment such as masks, gloves and sanitiser to workers at the start of Britain’s coronavirus outbreak.
Williams said Royal Mail is cutting costs by £130m, while slashing spending by about £300m over the next two years. “Regrettably, we are ... proposing a management restructure impacting about 2,000 roles.”
Royal Mail employs about 143,000 staff, including nearly 10,000 managers.
Since Britain’s lockdown was imposed on March 23, Royal Mail employees have enjoyed an elevated status with the UK public thanks to their key role in delivering virus test kits and helping businesses survive the economic fallout.
Williams praised the company’s workforce despite news of the heavy job cuts.
“I’d like to offer my profound thanks to all my colleagues across the group,” he said. “Our UK postmen and women are playing a crucial role in mitigating the impact of the Covid-19 pandemic. They are key workers on the front-line.”
The UK government began to relax Britain’s nationwide lockdown this month.
“The coronavirus outbreak has revealed long suspected weaknesses at Royal Mail,” noted Nicholas Hyett, equity analyst at Hargreaves Lansdown. “The group’s been over reliant on the shrinking letters market and with letter volumes down by a third in recent months that’s left it horribly exposed.
“Meanwhile, the lack of investment in parcels infrastructure means catering for the sudden spike in online shopping has seen costs rocket, so that the extra revenue is more of a burden than a blessing.”
Royal Mail’s share price was down 6.4% at 168.42p following Thursday’s update. The group posted a 13.6% drop in underlying operating profits to £325 m in the year to end-March.