Cost plan

Royal Mail to axe 700 management jobs

Royal Mail letters post box
Royal Mail jobs will go

Royal Mail is to cut about 700 management jobs in a move that will save about £40 million a year. About £30m of that would be taken out between April 2022 and April 2023.

The company also delivered 11% fewer parcels in 2021 compared to 2020, and 3% fewer letters, according to a trading update. This is due to lockdowns affecting normal business.

It said revenue fell by 2.4% in the first nine months of the year, but this is still up 17.1% when compared to 2019.

On the jobs cuts, Royal Mail said: “Our successful ‘Day in the Life of’ initiative has already reduced administration for frontline managers and allowed us to repurpose over one million annualised hours so that managers can spend more time focusing on their teams and customers.

“As a next step, subject to consultation, we intend to further simplify and streamline our operational structures to ensure an improved focus on local performance, and devolve more accountability and flexibility to frontline operational managers.”

The news comes as Royal Mail warns of disruption at ten of its delivery offices in the UK as it continues to be hit by staff absences which peaked at c.15,000 in early January due to Omicron.

The company faces a fine of more than £1 million over delivery chaos that has seen hundreds of thousands of families suffer weeks of delays.

It confirmed last week sorting and deliveries are being disrupted at 24 offices serving 38 postcode districts.

These include many areas across London as well as the Home Counties, the south coast, Manchester, Yorkshire and Scotland.

Chairman Keith Williams commented: “We delivered a solid performance over the Christmas period in particularly challenging circumstances operationally. I’d like to thank all of our people for their dedication over the period.

“We expected some decline in parcel volumes given most retail stores were open during the period, unlike last year. However, the trend towards customers wanting more parcels remains , and responding to that change efficiently is key. Our domestic parcels business in the UK has seen demand increase by around a third over two years , as has our GLS business across its markets .

“The past few months have demonstrated that the challenge for Royal Mail is to improve both quality and efficiency. Looking forwards, the delivery of our transformation and modernisation plans remain incredibly important in light of the fast-paced change we are seeing and ongoing inflationary pressures.

“Whilst GLS will also face inflationary pressures, our focus will be on continuing to leverage its distinctive and proven business model to exploit growth opportunities in a profitable way, whilst building on the progress made this year in previously underperforming markets.”

Simon Thompson, CEO, added : “With the rise of Omicron, absence has been around twice pre-COVID levels, with around 15,000 staff off sick or isolating in early January.

“Thankfully, this is now improving. We are resolutely focussed on addressing these issues which have affected our service in some parts of the country.

“Year to date we have spent more than £340 million on overtime, additional temporary staffing and sick pay, as well as providing targeted support for the offices most impacted. We have taken steps to maintain as comprehensive a service as possible, whilst keeping our people and customers safe.

“Higher absence has also been a headwind to delivering our productivity targets, but our Q3 performance gives us confidence in the delivery of adjusted operating profit for Royal Mail, before the cost of the reorganisation announced today, in line with previous guidance at around £500 million.”

“We have today entered into formal consultation on a management reorganisation to further streamline our operations and, at the same time, improve focus on local performance. We are committed to conducting the process sensitively, working closely with our people and their representatives.

“We have a track record of delivering change through natural turnover, redeployment and voluntary redundancy, wherever possible. Our full year outlook has been revised to take account of the costs of this reorganisation.”

Market reaction

Investors viewed the decision positively, marking the shares 5% higher 457p although that is significantly below its 12 month peak of 606p in June 2021.

Russ Mould at investment platform AJ Bell, said: “Royal Mail’s latest update showed the firm is continuing to drive efficiencies with plans to cut a further 700 management jobs.

“The decline in parcel volumes year-on-year is only to be expected given tough comparative figures to beat as a year earlier nearly all retail stores were shuttered thanks to Covid restrictions, meaning demand for online orders soared. 

“Perhaps more important is the fact the company maintained its share of a highly competitive market and it remains confident that, as we emerge from the pandemic, the amount of parcels being sent will remain permanently higher, thanks to a structural shift in the way people buy goods.

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“It’s not all positive news. Royal Mail has seen a substantial increase in the number of complaints as deliveries have faced big delays in recent weeks.

“In fairness at least some of this can be attributed to a factor entirely out of its control as the Omicron variant left many of its workers sick and unable to work.

“In streamlining the business, Royal Mail needs to ensure it doesn’t go too far and diminish its operational capability or spark widespread industrial action, the threat of which has hung over the business in the past.

“Outside of the UK, Royal Mail’s GLS international parcel courier division continues to make solid progress, and perhaps at some point suggestions that this part of the group might be spun off could be revived.”

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