PROFITS at Royal Mail have plummeted following the government’s cheap sell-off of the service to privateers, the company revealed yesterday.
The firm blamed the “harsh realities” of competition for the pre-tax profit fall to £218 million in the six months to September 28 from £233m a year earlier.
Royal Mail’s shares slumped 8 per cent yesterday and are down 30 per cent from a peak in February.
And the company warned investors that its British parcels market will grow by much less than expected over the next two years due to the impact of online merchant Amazon’s increased use of its own network for deliveries.
When it was still in public hands, Royal Mail was hampered by regulations forcing it to deliver post sent through private delivery companies such as TNT, enabling privateers to cash in on Royal Mail’s staff, expertise and its delivery network.
The regulations have not been changed following privatisation meaning Royal Mail still has to handle and deliver post on behalf of its commercial competitors.
The Communication Workers Union (CWU) said the drop in profits was further proof that direct delivery competition was damaging the financial sustainability of the universal six-day-a-week postal service.
CWU deputy general secretary Dave Ward said: “We need (regulatory body) Ofcom to perform its primary statutory duty by urgently reviewing the threat competition poses to the universal postal service.
“We’d like to see a cap put on competition to Royal Mail. The results today are proof that direct delivery competition is damaging the financial sustainability of the universal postal service.”
Royal Mail was established in 1516 and remained a publicly owned service until last year when the coalition government used legislation to sell 60 per cent of it to selected investors and hedge funds who then sold off their stakes to make a massive profit.
Its sell-off, engineered by Business Secretary and Liberal Democrat MP Vince Cable, was mired in controversy when it emerged that the selling price was £1 billion less than its value.