Royal Mail is an iconic national institution, and this Government will ensure that it continues to be one. Since taking office in July, the Secretary of State and I have been clear that the Government would robustly scrutinise the proposed takeover of Royal Mail, and ensure there are safeguards for its future.
While the takeover bid is still ongoing and subject to the relevant ongoing regulatory processes, this statement is to update the House on the legally binding undertakings that have now been given to Government by the bidder— EP Group. This does not mark the conclusion of the takeover, and these undertakings will only become effective if the takeover goes through.
Should the takeover complete, I am pleased to confirm that the Department for Business and Trade has secured significant commitments to promote the long-term and financially sustainable future of Royal Mail in the United Kingdom.
It may be helpful to set out where Royal Mail was at the time the takeover bid was announced. In its financial year 2023-24, Royal Mail recorded an operating loss of £348 million. At the same time, Royal Mail had not met its quality of service targets as set by the independent regulator, Ofcom. Royal Mail’s performance for the 2022-23 financial year resulted in a £5.6 million fine.
While the previous Government were happy to accept decline, this Government have worked closely with EP Group to secure significant commitments to delivering transformation of Royal Mail into a sustainable service, and hardwired in stronger protections for Royal Mail’s identity.
My Department’s objectives when these discussions with EP Group began were to first strengthen the financial sustainability of this iconic and important British institution. Secondly, we wanted to protect the customers, workers and brand of Royal Mail.
The Department for Business and Trade has agreed unprecedented commitments from the potential buyer of Royal Mail to protect its long-term future and to recognise its position in the UK’s national life.
Significantly, EP have committed to issue the Department for Business and Trade with a “golden share” in Royal Mail for certain matters. This means that—except in very limited circumstances—the Department for Business and Trade can now prevent Royal Mail from moving its headquarters abroad or moving its tax residency without the Government’s permission. This is an entirely new measure which was not in place at the time of Royal Mail’s privatisation, and it will remain in place in perpetuity, including where there is a subsequent change in ownership of Royal Mail in the future.
I want to be clear that this will not change any of the Government’s role in the day-to-day running of the business; Royal Mail remains a private entity.
In addition to this golden share, there are several other commitments made by EP Group to the Department for Business and Trade. These include:
A number of financial commitments to guard against value extraction and introduce a set of requirements to strengthen Royal Mail’s finances, including the implementation of a balance sheet restructuring, which will remove a significant intra-group debt that is currently due to the remainder of the IDS group.
There is a commitment from EP Group to ensure that Royal Mail has the financial means to fund the transformation of its business in the three-year period following completion of the acquisition.
Royal Mail has consistently not met its targets set by Ofcom. Recognising this, there will be a commitment such that EP Group cannot extract value from Royal Mail Group until it both can afford to do so, and has achieved specific performance targets.
I am placing copies of the deed in the Libraries of both Houses.
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