“The proper definition of a man is an animal that writes letters,” wrote Lewis Carroll. In, of course, a letter.
There was a time when you had to be a man of letters to be taken seriously. Victorians produced a prolific number of them, particularly after the Royal Mail entrusted their transportation to the new Liverpool and Manchester railway line in 1830. With the introduction of the penny post in 1840, cheap letter delivery was ensured and the modern version of the Royal Mail, a service that had existed since 1516, was born.
The age of the letter, however, looks as though it is over. In its trading statement the Royal Mail Group, a public limited company since its flotation on the London Stock Exchange three years ago, said there had been a sharp drop in the posting of letters. The number of addressed letters fell by 6 per cent in the nine months leading up to Christmas Day, after a 4 per cent fall in the six months before that.
Admittedly this fall is mostly down to a drop in marketing mail. “We are seeing the impact of overall business uncertainty in the UK on letter volumes, in particular advertising and business letters,” the group said.
The letter issues were offset by other successes. Parcel volumes were up 2 per cent (in December 138 million parcels were sent) and parcel revenue was up 3 per cent. Overall revenue was flat, although total letter revenue fell by 5 per cent.
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The decline of “snail mail” and a greater reliance on parcels is nothing new. However, the update on marketing mail follows a trend revealed in November, when Moya Greene, the chief executive of Royal Mail since 2010, said: “We saw the slowdown before the EU referendum vote and it has continued. In marketing mail, that is the first time we have seen a fall since I became chief executive.”
The festive period was particularly important to the delivery company after a fall in interim profits was posted last month, sending shares to their lowest level since the previous winter.
The success or failure of the Royal Mail Group is controversial not only for investors, but for taxpayers and bystanders too.
In 2014 Vince Cable, the business secretary at the time, concluded that the government lost out on £180 million by undervaluing shares when it privatised the group in 2013. On the first day of trading the 330p shares went up 38 per cent. A National Audit Office review said the sale had been rushed.
The Royal Mail Group also has a pensions problem. Plans to move its 90,000 workers from a final-salary pension scheme to a less costly defined contribution scheme has led to threats of the first national Royal Mail strike in eight years. (Post office workers went on strike before Christmas, but Post Office Limited became a separate company in 2012 and is still owned by the government.)
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A consultation has been launched into how to fund the pension scheme, with Royal Mail arguing that it would need to increase its contributions from £400 million a year to £1 billion to keep the fund running. The group made about £290 million in the last financial year.
Under its plans, workers will be expected to contribute 6 per cent of their earnings and the company the equivalent of 10 per cent. That compares to a company contribution in the present scheme that experts calculate as being about 17.5 per cent. The consultation ends in March.
The group has other plans to improve its lot. General Logistics Systems (GLS), its European parcel delivery subsidiary, bought Golden State Overnight, a Californian delivery company, for $90 million (£70 million) in October, which it said would give it access to a market roughly the same size as the UK. Royal Mail is also in the middle of a cost-cutting programme, targeting a reduction of up to 1 per cent in underlying operating costs for UK Parcel, International and Letters (UKPIL is one of its two core divisions, along with GLS).
However, any industrial dispute is likely to result in lost earnings for investors, as is the kind of generous pensions settlement that will be needed to avoid strikes.
Suddenly it isn’t at all about the men or women of letters, but the men and women who deliver them.
■ Verdict Online shopping gave the group a boost over Christmas, despite fewer letters being delivered, but industrial action looks likely and will almost certainly be protracted. Sell.