UK government moves to sell off Royal Mail

The British government began moves on Wednesday to sell off up to 90 per cent of state-owned letters delivery business Royal Mail, with the remaining stake reserved for the company's staff.

Introducing a bill to parliament, the government said it would take on a pension deficit that had been valued by trustees at £10.3 billion.

"We're keeping an open mind, it could be an IPO, it could be a trade sale," Business Secretary Vince Cable told reporters at a briefing on the bill.

He declined to put a value on the business, which has more than 155,000 staff, or set a specific timetable for the sale.

The Conservative-Liberal Democrat coalition government, which took office in May, is hoping to succeed where its Labour predecessor failed with a less ambitious plan.

Labour dropped plans last year to sell up to 30 per cent of Royal Mail, citing market conditions and also facing strong opposition from trades unions.

The Communication Workers Union (CWU) accused the government of having an obsession with privatisation.

"The government has wasted no time in flogging off the country's state assets without exploring other options," CWU General Secretary Billy Hayes said in a statement.

"Handing postal services over to the City spivs and gamblers that Vince Cable recently denounced, but is now feeding, will be bad news for everyone," he added.

Cable, who launched an attack on the excesses of capitalism at his party conference last month, said that a foreign company could acquire Royal Mail.  "We're not nationalists in this government ... some of our best companies happen to be foreign owned, we're not going on a nationalistic jihad against foreign companies," he said.

The government said that Royal Mail's operating profit for its letters business in 2009-10 was £121 million, but that its profit margins of less than two per cent badly lagged those of continental European peers Deutsche Post and TNT.

It is operating in a shrinking market as e-mail increasingly replaces paper letters.

A report in the Times newspaper on Wednesday said the privatised business could be worth as little as £700 million once debt was taken into account.

However, Cable saw scope for a strong business but said that a government seeking to eradicate a record peacetime budget deficit could not fund the necessary investment.

"Although the Royal Mail had had terrible problems, it is in the process of being modernised and I think the assessment is that it potentially has a very good future, but that future hinges on being able to make substantial investment

"The government cannot make that investment, for obvious financial reasons," Cable said.

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