Britannia Radio

Postal Privatization Scheme Fails to Deliver in Great Britain

(This article appears in the July/August 2008 issue of The American Postal Worker magazine.)

Postal privatization in the United Kingdom has produced “no significant benefits” for consumers or small businesses, and has posed “a substantial threat” to universal service, according to a preliminary study released in May.

Union members rally at a Royal Mail “sorting office.”

The independent review also found that while large mailers have benefited from the nation’s efforts to “foster competition,” privatization will undermine the Royal Mail, Great Britain’s government-run postal service, which was expected to co-exist with private competitors.

“There is now a substantial threat to Royal Mail’s financial stability, and therefore, universal service,” reported a panel of experts commissioned by the nation’s Department for Business, Enterprise, and Regulatory Reform. “We have come to the conclusion, based on evidence submitted so far, that [the privatization plan] is not tenable.”

The study criticized privatization initiatives that have designated thousands of British post offices for closure and concluded that universal postage rates and next-day delivery are threatened by newly created market forces.

“The core problem for the Royal Mail is that while it has lost business in the lucrative bulk mail collection and sorting market,” the British Broadcasting Corporation editorialized, “it still has to uphold universal mail delivery service, which struggles to make a profit.”

According to a leading British newspaper, “Royal Mail has seen private-sector rivals poach big business customers but continue to use the state-owned company’s postmen and women to provide ‘last mile’ letter and parcel delivery.” The Guardian reported that “Royal Mail has continually argued that creaming off big business puts at risk the less profitable but socially important part of the market – the universal service of same-cost delivery throughout the UK.”

The British government’s 350-year monopoly on postal services ended in early 2006, when private operators were allowed to begin collecting, processing, and delivering mail. Great Britain is among several European Union nations that to date are complying with a 1997 EU directive that member states open their postal markets to competition.

“The privatization of mail service in Great Britain holds important lessons for the United States,” said APWU President William Burrus. “The end of the postal monopoly has benefited large commercial enterprises, but there have been no benefits for individuals or small businesses. These are precisely the effects the APWU has warned about in our presentations on postal reform in this country.”

While British regulators struggle to address the problems identified in the study, the Communications Workers Union, which represents Royal Mail employees, has been conducting job actions to protest the privatization scheme. “Currently, the policy and funding of the Royal Mail makes its future untenable,” said Dave Ward, the union’s deputy general secretary. “It damages services to customers, the terms and conditions of workers in the industry, and the future of universal service.”

Postal Systems Overseas

After the nation’s most recent postal “reform” debate, the United States opted to continue its long tradition of providing postal service as a public service. Australia, Japan, and many other nations around the globe, however, are moving to privatize collection, processing, and delivery functions.

European Union member states have agreed to ease government postal service monopolies and allow private companies to provide letter- and package delivery services by 2009. The EU, which was established in 1993, has a common currency, the Euro, and a mandate to create a common, tariff-free market for goods and services.

Sweden, Finland, the Netherlands, and the United Kingdom have followed the timetable and rolled back postal monopolies, while other EU nations’ plans have been slowed by opposition from consumers and postal unions.