Tuesday 24 October 2017

Failed privatisation

Royal Mail have a problem.

Their shares are 3.84. Down from 4.89 last October. And as threat of a strike looms, they are sinking further.
When Royal Mail was privatised, they were pitched into the competitive world with all their land and vehicles and warehouse, and with a hefty lump sum for modernisation.
But still with their existing, heavily unionised, militant workforce. So it was always going to be hard to change working practices, pensions and pay deals. In Royal Mail the pay is above industry rates, but not by too much. The overmanning was already being brought under control some years before privatisation. Since about a quarter of jobs have been lost and many mail centres closed.
Staffing is as near the lowest point it can be, for the service that they legally have to provide. Effectively visiting every house, every day.

What the current strike is about salary, an effective pay-cut over three years, partially it is about is RM want those remaining jobs to be part-time. They want the early starts to become a thing of the past. They want shifts to begin mid morning and end mid evening. To be more in line with competitors and when people are actually at home.  
Despite the switch to just leaving packets with a neighbour or in a shed, some 20% of all items attempted for delivery, end up coming back to a depot. For redelivery the next day. Later starts should reduce this.
 For Post-people, long accustomed to early shifts, this change is very unwelcome. 

The Royal mail privatisation was a botch from day one. The onerous and ridiculous delivery conditions that a subsidised state monopoly could put up with, are draining in a privatised business. Letters make a loss. They have done since even before email was invented. None of Royal Mail's many, many competitors has to deliver to each house, each day. Offering a theoretical next day delivery to anywhere within the British Isles for a sum that is so small there is next to nothing in a supermarket that could be bought for such a feeble price. {65p}.

Royal Mail workers, unlike their 'gig' {fake self employed} economy rivals are paid for their sickness. Their holidays. They have good pension schemes and a excessive public health and safety regulation and expensive equipment runs throughout their organisation. All this makes it very, very hard for them to match the prices that their competitors offer for delivery. My Hermes drivers are self employed. Supply their own vehicle and have almost no in-work benefits at all. Hermes cuts Royal Mail on price and picks up the juicy parcel delivery work, that used to subsidise the loss making letters business. They have newer and better technology. Cheaper workers and lower employment taxes. Its a very unlevel playing field and has been for a good fifteen years or more. 

So Royal Mail are right to try and make the changes they deem necessary.

What has given them a massive pause though is that despite the newly privatised workforce jettisoning its militant ways, and generally behaving like a non public sector business, THIS TIME, its different.

The CWU could usually expect to just squeak through a strike call. If they mobilised their hardliner depots and activists and proceeded with a maximum effort, get out the vote.
This time the strike action was backed by 89% of members. If that many did go out, all the managers in Royal Mail rushing around to deliver, couldn't manage more than the utmost priority items.
For my money, at this point in the season, with that vote, Royal Mail needed to go back to negotiations.

Somewhat riskily, instead, they opted for legal action to prevent the strike that was called originally for last week. 

Where I think this is foolish is that now, instead of a strike in October, when no one cares, if talks don't succeed the strikes will take place in November when every single business in the UK is looking at its Black Friday / Christmas distribution schedules. 
No one can take a risk. If Royal Mail aren't likely to be delivering, then one of their competitors gets the call. And those competitors make huge gains when RM is on strike. My Hermes went from 5% of parcels to 12%, including becoming the unbelievably huge ebay's preferred carrier, largely on the back of a long and pointless strike by postal workers.
Amazon, which used to be Royal Mail business now mostly deliver their own parcels themselves.

Quango's Law. 
Learned from years and years in retail management meetings.
Never mess with anything in quarter four that you can easily mess with in quarter one.


K said...

Royal Mail's problem is that the EU requires them to offer a universal service while also preventing them from adding value to the service such as tracking (look at how carefully they state that Signed For doesn't offer "tracking" but does offer "delivery confirmation").

The difference becomes clear when you compare services like Royal Mail 24 (1-2 days universal service, cheap, has a letter format, no compensation) to Royal Mail Tracked 24 (1 day to most post codes, 2-3 to others, expensive, parcels only, includes compensation).

The stupid thing is even most universal service items going through their network are scanned and trackable already but the data is hidden for legal reasons. It's possible to unhide the data by modifying the pre-advice CSVs you upload to Royal Mail's FTP but you'll get revenue protection on your arse for that.

So Royal Mail needs to hold out until after Brexit and then lobby the government to remove the USO restrictions.

It also seems like all our postmen have gotten 20 years younger and a lot more female over the last two years so most of the militants are probably retiring.

Electro-Kevin said...
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Electro-Kevin said...

I was a motorcycle courier for six months in London. Self employed, running my own bike. A breakdown could wipe out my earnings - and did, several times.

I stopped after I'd gone sideways up the road a few times and realised that I was overlooking important repairs to keep my costs down. Money and corner cutting became an obsession.

The Guardian ran a report on Hermes drivers earning below minimum wage and horrible memories resurfaced.


No sick pay, no holiday pay, so safety regs and no minimum pay. Been there, done that, accepted it. Was outa there as soon as something better came along (a factory job.)

But what Hermes cannot expect is for its gig drivers' families to be supported by the state with in-work top-ups - especially if they're off-shoring their accounts.

That's a state subsidised business in all but name.

The best way to get this economy going is not to squeeze those already trying but to cut benefits for those who don't. RM arrangements might not seem such an uncompetitive deal when Hermes' contribution to the national debt is fully considered - and that includes drivers packing work in altogether because (when it comes to the serious business of raising kids) the better gig is the rock and roll.

Electro-Kevin said...

Imported drivers, this time about taxi drivers but courier drivers are often imported too.

We use mini cab firms a lot and rather than vet them my company has set up a bad driving hotline - it is that frequent that we are given a driver straight off the boat.

The taxi assigned to me early this morning, I had to order the driver twice to get on the right side of the road as he thought we were on a dual carriageway.

I've had one doing 100mph because "We're allowed to in my country." and I've had another try to enter a motorway on the exit road instead of the slip road - he would have gone the wrong way up the M5 had I not told him.

It would be most interesting to read the kill rate by gig drivers over properly contracted ones.

I expect (like Rotherham) it's being covered up because my experience is not altogether good.

DJK said...

BQ: You seem to think it's a good thing that (a) a lot of properly paid jobs with pensions and benefits for unskilled people disappear, (b) the universal delivery obligation ceases, and (c) what's left of the mail business becomes a private monopoly.

Personally I think profit and loss (within reason) at the old Royal Mail was irrelevant because what the service provided was an essential glue to hold society together, or if you like a lubricant to allow commerce to flow freely. Yes, prices could have been increased and service cut but only at the expense of loading cost and inconvenience onto everybody else. Taksn as a whole (a whole society approach) I think the pre-privatised service did a fairly good job and collectively we were better off with it than without it.

dearieme said...

"if talks don't succeed the strikes will take place in November when every single business in the UK is looking at its Black Friday / Christmas distribution schedules."

Could a senior executive have argued the subtle line that the men wouldn't dare strike in November when that might mean the end of RM? Probably not: they didn't get where they are today by thinking subtly.

Bill Quango MP said...

DJK: No. I believe the opposite. Like you I think there was little wrong with the old service that couldn't be resolved by greater investment and better technology.
however it was a very militant, very strike prone industry. Depots going out on strike because a dog bit a worker or a bicycle chain was loose.
It still delivered, at reasonable cost, a good service that could be used by all.
It was the pensions that was causing the problem.
The days when a postal worker could get paid for eight hours but be finished within four have been gone for six or seven years.

Having said that, the innovations we see today in real time tracking. Same day delivery, all came from the private business end. Like any state industry RM had become moribund. But not nearly as badly as some.And IF it had been privatised at the same time as the end of its monopoly, not ten years afterwards when all the other players were already in place, it would have been the new 'BT' of privatisation. Instead of a British Gas.

Bill Quango MP said...

Dearime.RM management took legal action as they don't want a strike at all. However if they aren't prepared to offer any more, then all they are doing is delay.
There are 2 key strike points.

1. Existing pension rights for all new entrants.
2. Working hours.

Point 1 is unsustainable. The union does its existing members no favours by pretending its still 1985 and everyone can retire at 60 with a huge pot.
The existing members aren't too fussed on newbs either.

On the time changes. RM will not budge. They are bringing it in no matter what. They would rather lose business than change course on this. And that is the contentious point vis the workers. So a second strike call is unlikely to be much less supported than the first. And if it occurs in December, then its impact will be ruinous for RM.
Direct X. Connect plus. My Hermes all have email data lists and can send millions of domestic customers messages telling them how to use their service, not RM. All at no greater cost to the sender.

Bill Quango MP said...

EK-Cu: You have both long pointed out the government is subsidisng new businesses to undercut established ones, all in the name of low unemployment.
The tax office subsidises individuals who take on these jobs too. And actively encourages regular businesses to make their workers self employed with no employment rights.

This is a big area for unions that they can't yet address.
Its a very big area for labour once they realise that it isn't zero hours that is a problem. Its the rights of people on zero hours that are very few compared to full employment contracts.
The row now about sexual harassment. How do the self employed, who aren't really self employed, complain ?
Government has had ample opportunity to look at this whole area. And so far just won't go near it.

Electro-Kevin said...

Amazon pays just £15m in tax out of £20bn in sales across the EU.

HMRCs tax consideration for underpaying corporates is now £5.8bn.

If Hermes drivers are unable to earn a living wage and yet are living then there's something wrong with the equation - someone is making up the difference.

Amazon and the like are state subsidised businesses, clearly.

Bill Quango MP said...

K - Royal mail back office tracking is able to pin point where there people are all the time. And who delivered what to where. Bt as you say, its not so far fully available to the public. Partly as the bulk of domestic parcels comes through post office, and post office are paying all their people less for doing more of Royal Mail's work. So an 'FU' attitude begins at source.

Personally, I'd scrap 1st and 2nd on letters. Charge everything at a rate between the two. And make it 1-3 day average delivery rate.
Those that want faster can pay courier rates for next day letters. £6-£7 via RM or one of the others.

This wouldn't make much difference to RM except that it would get more revenue for 2nd class.

Anonymous said...

In the 1890s, you could send a letter to a friend at 9 AM, inviting him to dinner that evening, and get his reply at tea time in the third delivery -- at least, if you both lived in London.

In the 1950s, there were two deliveries a day 364 days a year (every day except Boxing Day).

Something went wrong.

K said...

@BQ In their post scheme consultations from last year they specifically say that they can't make the information available to the public for legal reasons: https://www.royalmailgroup.com/sites/default/files/Delivery%20confirmation%20-%20DECISION%20DOCUMENT_FINAL_15.12.16.pdf

Royal Mail is not allowed under the current regulations to provide pipe-line or end to end tracking on standard USO services

I was unable to find the specific law that restricts them but anything related to the USO is usually handled by the EU. However I also skimmed (i.e. used ctrl+f) the EU postal legislation and couldn't find any mention of tracking.

Hermes would be fucked if Royal Mail were allowed to show the tracking data to the public.

James Higham said...

“But still with their existing, heavily unionised, militant workforce. ”

There it is.

Electro-Kevin said...
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Electro-Kevin said...

James - Before long it'll be Uber police, Uber doctors, Uber teachers, Uber pensioners...

All of us on zero hours contracts.

I'm fine with that on two provisos:

- the Uberists are not state subsidised as they are now, with the welfare buffer, or if they are they pay a very large tax contribution towards it

- Uberism extend to every single person in our society.

No person should be allowed to settle in a job or rest, there is always someone better who can do a job.

hovis said...

Late to the game - but I fuzzily recall one of the other isues as well as the standard unions are to blame etc etc is they are forced to carry competitor mail under EU law at lower cost than they can charge themselves - I would need to double check but it would not be suorising. Addin universality and the die was cast for everyone to complain Royal Mail are awful and should be asset stripped in the name of efficiency.

dearieme said...

I laugh at the pension point. Hah! Hear me laugh.


Bill Quango MP said...

Hovis - You are correct.
You could theoretically set up your own postal delivery service. costs about £50 to register.
The price of a second class is 56p.
You could charge people 50p. Then just drop off all your letters to RM who have to deliver it and can only bill you something like 45p for each item.

I can't remember the figures either. But the gist of what you believe is correct.

dearieme : That is a superb spot.
Union closing final salary scheme for its own members while insisting Royal mail never closes theirs.

Electro-Kevin said...

Dearieme - The original post cited some companies as showing the way. Well Hermes, Ubers and Amazons are riding on the back of state subsidies and are far removed being the red-in-tooth-and-claw entities they claim to be.

They do not properly contribute to the infrastructure and workforce from which they profit - certainly not paying enough for their contractors to make pension provisions, which will resurface as welfare dependency later on.

At least the CWU (no fanboy here) is providing a pension and what have posties to lose ? They're going to get boned whatever they do.

Bill Quango MP said...

I've had to just reread it all.
EK and DJK think its pro=hermes.

it really isn't.
I keep pointing out the unfairness of it all. Sure, the competitors are leaner and cleaner and quicker and cheaper.
But they have no baggage. And as CU says , they are using the holes in employment law to do it and make everyone worse off.

Electro-Kevin said...


But they do have baggage. It just goes through check-in without weighing first.