(qlmbusinessnews.com via theguardian.com – – Thur, 25th June 2020) London, Uk – –
Company announces one in five managerial jobs will go and says cuts will not involve delivery staff
Royal Mail has announced a cost-cutting plan that will involve slashing about 2,000 jobs in a move accelerated by the Covid-19 crisis.
One in five of its near-10,000 management roles will go by March 2021, in areas including IT, finance, marketing and sales. The company’s 90,000 postal workers would not be affected by the cuts, Royal Mail said.
The sweeping changes follow years of declining profits and a failure to respond quickly enough to the drop in letter volumes and a boom in parcels linked to online shopping.
The company said the pandemic had accelerated that shift towards more parcels and fewer letters being sent. It also warned that its UK business, which swung to an annual loss, would continue to be loss-making this year.
Royal Mail Group’s interim executive chairman and a former boss of British Airways, Keith Williams, said: “Covid-19 has accelerated those trends, presenting additional challenges.”
He added that “immediate action” would help to save £130m in staff costs next year. The company also aims to slash spending by a further £300m over the next two years.
Williams described the job cuts as “regrettable”, adding: “We are committed to conducting the upcoming consultation process carefully and sensitively. We will work closely with our managers and their representatives during this difficult period, including supporting them as they transition into the next stage in their careers.”
The Unite union – which represents around 6,000 managers at Royal Mail, said the cuts were a devastating blow to its members. “[It] is a classic example of trying to reposition a business to create a viable long-term future, while feeling under pressure to make short-term cuts that only hinder that transition.”
“We will be pressing the top management to clarify how sweeping away the very employees managing the transition process is going to produce faster and better company decisions for the benefit of customers,” Unite added.
Royal Mail shares were down 11% to 159p after the announcement on Thursday, making it the biggest faller on the FTSE 250 index.
While delivery staff were not targeted by the cuts, Royal Mail confirmed there would be a gradual decline in frontline workers as it started to automate the processing of letters and parcels.
Postal workers and managers accounted for a portion of the 2,000 full-time roles that were lost in the past year. The company said this was partly due to voluntary redundancy programmes, but also accounted for staff who quit or retired and weren’t replaced.
“There’s been a reduction in the number of frontline people, year-on-year for the last 12-15 years,” said Stuart Simpson, who is serving as interim chief executive of the UK branch of Royal Mail.
“We’ve now got 20 parcel sorting machines distributed across the country. The last one of which we just installed about a month ago. So we are continually, making change, we just need to do it at a faster rate,” Simpson said.
The cuts were announced alongside Royal Mail’s annual results, and a month after the surprise departure of Rico Back, who had been with the company for three decades but left after less than two years as chief executive.
Williams said: “We agreed with Rico to leave. The one thing we’re calling out today is that we need a quicker pace of change.”
Pre-tax profits for the year to March 2020 fell by a quarter to £180m. Revenues over the period rose by about 2.5% to £10.8bn. Letter volumes fell 8% over the year, while parcel volumes rose 2% – less than expected.
Royal Mail said the pandemic resulted in a strong jump in UK parcel deliveries at the end of the financial year, which was offset by a drop in letters – especially from advertisers – and international parcels. The company said it was also hit by unexpected costs to cover protective equipment, social distancing measures and overtime pay for staff.
“At the heart of this plan is our intention to move from being a UK-focused letters business that also delivers parcels to an international parcels business that delivers letters in the UK. The rationale underpinning our strategy is, in fact, even more compelling now that we are dealing with the consequences of Covid-19.”
Executives expect the UK business to be loss-making this year, as it weathers a “deep recession” both at home and abroad. In the worst-case scenario, it expects a 15% drop in UK economic growth over its 2020-21 financial year, which will slash domestic revenues by up to £600m. Its UK business swung to an operating loss of £140m in the year to March, having reported a profit of £72m a year earlier. Revenues rose just 1.6% to £7.7bn.
“The unprecedented nature of the Covid-19 pandemic means the outlook is difficult and volatile,” Royal Mail said.
The company has cancelled any potential dividend for the next financial year, but told investors it planned to restart payouts by the 2021-22 financial year.
By Kalyeena Makortoff