There is reason to fear the takeover of Royal Mail by a private financier. It’s fair to say that, in the long run, everything about the 500-year-old institution may now be at risk.
A series of commitments made by Czech billionaire Daniel Křetínský in his bid for the postal service’s parent group International Distribution Services (IDS) – accepted by the board on Wednesday – will be vulnerable to renegotiation in just a few years.
The connection to 28 million households and more than 5 million businesses is at risk. A central question is whether clients will still be able to afford to post a letter. Another is whether those on the fringes of the new owner’s vision—rural residents and the elderly—can be excluded to improve the company’s profitability.
Křetínský is proposing to take IDS private for £3.57bn, absorbing around £1.7bn of existing debt in the process. It says it will pay for the business with £1.2bn in cash and a further £2.3bn in debt, meaning Royal Mail will be saddled with even more debt if the deal goes through.
Indebted businesses that the UK government considers strategic, such as Thames Water, can use these loans as leverage to influence ministers and regulators.
No minister wants to consider renationalisation when the purchase includes the price of a huge pile of debt. Debt is like a poison pill that prevents ministers from acting decisively.
It also has commitments to keep Royal Mail as a recognizable entity. Křetínský promises that the brand is sacred for five years, as is its UK headquarters and tax residency.
A separate promise to keep basic wages and benefits for staff will last for just two years, while the promise not to break up the company is for three years.
In the context of an organization that dates back to Henry VIII, these are micro engagements.
No doubt ministers will be told that making further demands on Cretynski will scare him away and Royal Mail, left to fend for itself, will not be viable.
Jonathan Reynolds, the shadow business secretary, who met Kretynski at the recent World Economic Forum in Davos, turned his back on union calls for renationalisation.
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Reynolds said the Czech’s assurances that Royal Mail would “maintain its British identity and protect its workforce” were welcome, indicating he was determined to pull through with the takeover if Labor won the election.
Look across the Channel to France and the government is funding a universal service to bind the public to an institution that, while not subject to criticism, provides a sense of collective well-being by ensuring that everyone can communicate using paper for official and friendly purposes . Likewise, the US retains ownership and management of the US Postal Service.
There is no doubt that Křetínský’s bid for IDS is audacious. It means taking an important UK public company with a long history and strong ties to the monarch and turning it into another cog in a growing private empire.
The next government must take a firm stand. Privatizing a business and listing it on the stock exchange, where companies are forced to be transparent about much of their operations, is one thing. Selling it to a private financier whose operations are mostly overseas is quite another.