Royal Mail Privatization - 12 Years Later

With talk of privatization of US Post Office, let’s look at what happened in the UK. Royal Mail was privatized in 2013. In 2024, the UK government approved the sale from International Distribution Services (IDS) to Czech Billionaire’s EP Group for $4.5B USD. In October 2015, the last remaining shares that were owned by the British Government (13%) were sold for roughly $600M pounds. That was the end of the governments ownership in the 500 year old Postal Group. The Royal Mail was listed on the London Stock Market. Soon after the privatization, union members voted to go on strike.

Criticisms at the time were for several reasons: 1) They were selling it too cheaply 2) It would hurt good paying union jobs 3) Disrupt Service Standards. This sounds familiar to the conversation in the US.

The UK Govt. had to approve the 2024 buyout, and at the time, it said the agreement was an example of “government working hand in hand with the private sector to improve crucial public services” “Agreement backs Government’s Plan for Change, creating the strong foundations needed in Britian’s supply chain to kickstart economic growth and deliver for workers.” “Deal protects workers and key services whilst seeing Royal Mail continue to be headquartered in Britain, securing jobs and tax receipts in the UK”

The new sale agreement, protects and secures investment in the postal network. The government hailed it as “ensuring a financially stable Royal Mail with protected links between communities other providers can’t reach.”

The union, representing the Royal Mail employees says: “We are pleased to have reached a negotiators settlement with EP Group covering crucial areas such as job security, the governance of the company, a meaningful stake in the business for employees, restoring quality of service, legally binding commitments and improving the terms and conditions of our members. This agreement provides the foundation to rebuild Royal Mail. These have been challenging negotiations but through the support of our members we have delivered what by any measure is a groundbreaking agreement which puts postal workers and customers back at heart of everything Royal Mail does”

So the employee union is happy, the small communities it serves are protected, and private dollars are being injected to modernize and improve the post and bring financial stability. In addition, the agreement contains provisions that private ownership can’t extract value in a sale through a financial provision, if done so through debt, and a service quality provision, against baseline service performance. It also required first class mail (letters) to maintaining “one price goes anywhere”, delivered six days a week.

Critics have noted that 1) By 2018, Royal Mail had been demoted from the FTSE 100, and its share price has been volatile, reflecting financial difficulties. 2) The obligation to provide a six-day-a-week universal service means Royal Mail has higher costs compared to rivals. 3) The rise of email and digital communication has caused a steady drop in traditional letter deliveries, a core part of Royal Mail’s business. 4) Royal Mail has struggled against private competitors like Amazon, DPD, Evri (Hermes), and UPS, which operate with leaner cost structures. 5) Before privatization, Royal Mail was known for reliable next-day letter deliveries and consistent service. 6) Post-privatization, there have been frequent complaints about Delays in mail deliveries, with some areas experiencing days or even weeks of disruption, Reduced Post Office accessibility, as closures and restructuring have affected rural areas the most, and Inconsistent service levels, with parcels often prioritized over letters due to profitability concerns.

Should this be further studied in the US?