Royal Mail To Slash 2,000 Management Jobs As Fewer People Write Letters

Royal Mail plans to cut 2,000 management jobs -- about one-fifth of the company's management positions -- as the coronavirus crisis has dampened letter writing following years of declining profits,

Back-office jobs, including finance, marketing, sales and information technology will be the hardest hit. The layoffs are expected to be completed by March 2021.

Frontline postal delivery staff were not included in the latest round of job cuts since Royal Mail needs to preserve "quality of service.”

Royal Mail, a public company that trades on the London Stock Exchange, said the cuts are expected to save about £130 million ($160 million) in costs starting next year.

“In recent years, our U.K. business has not adapted quickly enough to the changes in our marketplace of more parcels and fewer letters. COVID-19 has accelerated those trends, presenting additional challenges,” said Keith Williams, interim executive chairman.

“We absolutely need to transform this business. Our profits have been declining five to six years in a row,” added Williams.

Williams replaced former boss Rico Back who abruptly quit in May after contentious battles with unions.

The company will also reduce capital expenditures by about £300 million ($372 million) over the next two years, to “address the immediate impact of COVID-19.”

Richard Hunter, head of markets at Interactive Investor, said Royal Mail has been attempting to move away from its British-focused letter carrying business to become an international parcel delivery business.

“The uncomfortable truth is that Royal Mail’s abominable performance in recent years is largely because it has failed to adapt to a world where people send fewer letters and more parcels,” said Adam Vettese, an analyst at eToro.

While postal carriers were spared in this round of layoffs, BBC reported that the company will likely impose tough conditions on its workforce. Royal Mail has had a difficult relationship with its employees and the Communication Workers' Union.

Further, Royal Mail conceded there will eventually be a gradual decline in frontline delivery workers as the company increasingly automates the processing of letters and parcels.

The Unite union, which represents 6,000 Royal Mail managers, said the job cuts were “devastating.”

“[These layoffs are] 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,” said Unite national lead officer for the Royal Mail Group Mike Eatwell. “It also deflects attention from where the real problems lie. Poor decision-making at the top of Royal Mail in the past has failed to recognize the pace in the decline in the volume of letters, and there has been a too slow investment in technology and facilities to keep abreast of the huge growth in parcels. This scenario has been made worse by the adverse impact of coronavirus on the economy.”

Eatwell said his union “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… our aim is to avoid compulsory redundancies and we believe that any job losses that do occur should be voluntary and by natural wastage.”

The company, which did not pay a dividend to stockholders in 2020, also will not pay one in 2021.

For the fiscal year ended Mar. 31, 2020 Royal Mail posted a pretax profit of £180 million ($223 million), down from £241 million ($299 million) in the prior year.

Letter volumes dropped 8% over the year, while parcel volumes climbed only 2%.

Recently, Czech billionaire Daniel Kretinsky has acquired an 8.2% stake in Royal Mail through Vesa Equity Investment, an entity he controls with Slovakian businessman Patrik Tkac. Vesa’s activities has raised speculation of a possible takeover of Royal Mail or a breakup of the company.