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Royal Mail to be floated on stock exchange Royal Mail workers to get free shares in planned sale
(about 3 hours later)
Business Secretary Vince Cable has confirmed that the government will sell Royal Mail through a flotation on the London Stock Exchange. Postal workers are set to receive millions of pounds' worth of Royal Mail shares when the company is privatised later this year.
Mr Cable told MPs that employees would be given 10% of shares for free, and the public will be able to buy shares. Business Secretary Vince Cable said employees would be given 10% of shares as part of a stock market flotation.
The sale is likely to value the business at £2bn-£3bn. He described it as "the biggest employee share scheme for nearly 30 years".
Members of the Communication Workers Union (CWU) are overwhelmingly opposed to the privatisation, and have threatened strike action. Unions have reacted angrily to the plans and have threatened to ballot for strike action.
"Now the time has come for government to step back from Royal Mail, allow its management to focus wholeheartedly on growing the business and planning for the future," Mr Cable said in a statement to the House of Commons. The Communication Workers Union (CWU) said the sale of Royal Mail was "unwanted by public, customers and the workers".
The government has opted to float the company on the London Stock Exchange rather than sell it to a private buyer.
Members of the public will be able to buy shares, alongside larger institutional investors.
Commercial freedom
But 10% of shares are being set aside for eligible members of Royal Mail staff, which they will get for nothing.
"Now the time has come for government to step back from Royal Mail, allow its management to focus wholeheartedly on growing the business and planning for the future," Mr Cable told MPs.
"It's now time for employees to hold a stake in the company and share in its success.
"This government will give Royal Mail the real commercial freedom it's needed for a long time.""This government will give Royal Mail the real commercial freedom it's needed for a long time."
He said the decision was a commercial one, designed to "put Royal Mail's future on a "long-term sustainable basis". The sale is likely to value the business at £2bn-£3bn, suggesting up to 150,000 staff will receive £200m-£300m in shares.
He said employees should take a stake in the business and described plans to give postal workers free shares in "the biggest employee share scheme for nearly 30 years". The government says the sale is necessary in order to give Royal Mail the access to private capital it needs to grow and remain competitive.
Strike warning It is currently revamping its business to focus less on the delivery of letters and more on parcels, in order to benefit from the rapid growth of internet shopping.
Selling shares on the stock market has been chosen over selling off the business to a private operator.
Companies such as TNT and DHL had been suggested as possible buyers.
Speaking earlier on BBC Radio 4's Today programme, Business Minister Michael Fallon said the time was now right to "free up" Royal Mail and give it access to private capital that would allow it to grow.
Royal Mail is revamping its business in order to focus less on the delivery of letters and more on parcels, following the rapid growth of internet shopping.
A boom in parcel delivery helped Royal Mail to more than double its profits last year, after many years of losses.A boom in parcel delivery helped Royal Mail to more than double its profits last year, after many years of losses.
The CWU, which represents around two-third of the Royal Mail workers, opposes privatisation. Mr Cable also said privatisation was necessary to ensure that universal service, which guarantees delivery to all parts of the UK on six days of the week, can continue.
In a letter to Mr Fallon, the union warned that if the government did not think again about the privatisation, then "the threat to terms and conditions of postal workers will inevitably lead to strike action". But both Labour and the unions argued the move made no sense.
CWU general secretary, Billy Hayes, said: "Nobody outside of government and their potential investors wants their postal service sold. The public consistently oppose the sale and recently 96% of workers voted against." "Having nationalised the organisation's debts by taking on its pension liabilities, they now want to privatise the profit at the very time it is making money. How on earth does that make any sense?" said Labour's Chuka Umunna.
'Unresolved issues' Dave Ward, deputy general secretary of the CWU, said the flotation announcement had "ignored the views of the workforce and the British public".
Strike warning
"The workforce agreed a modernisation programme with Royal Mail three years ago and it didn't include privatisation," he said.
"They have worked hard to modernise the company and deliver the profitable organisation Royal Mail is today. They have recently voted in big numbers against the sale and they will be angered by today's announcement."
He said the union would continue to fight the sale and warned that, without a legally binding agreement on terms and conditions, strike action was "inevitable".
The CWU represents about two-thirds of Royal Mail staff. Earlier this year, its members voted overwhelmingly against privatisation.
The threat of strikes means it is possible that the share sale, set to take place towards the end of the year, could take place under industrial action.
Speaking later to the BBC, Mr Cable described the share offer and a recent pay offer by Royal Mail as "attractive" and said he hoped strike action would not ensue.
"I think when they look at this in the cold light of day, I think they will see that it is in their interests not to disrupt it," he said.
The flotation is likely to be one of the biggest since large utility companies such as British Gas were privatised in the 1980s.The flotation is likely to be one of the biggest since large utility companies such as British Gas were privatised in the 1980s.
It will not include the Post Office. The two are separate companies with independent boards. It will not include the Post Office, which is a now a separate company.
The Royal Mail sorts and delivers letters and parcels, while the Post Office is the national network of branches that offer postal, governmental and financial services. The Post Office itself is not for sale. The government said it planned to invest in the network of post offices and potentially set it up as a mutual business.
The sell-off of Royal Mail is not a big surprise - the government enacted the necessary legislation through the Postal Services Act 2011. The idea was first mooted under the last Labour government.
Chuka Umunna MP, Labour's shadow business secretary, said the government was pushing ahead with the privatisation simply to "dig the Chancellor, George Osborne, out of a hole of his own making".
"There are still huge unresolved issues around competition, and ministers haven't said how much capital they expect the business will be able to raise after privatisation or how the proceeds of the sale will be used," he said.