Roland Mortimer welcomes the privatisation of Royal Mail.
Today’s announcement that the privatisation of Royal Mail will take place in the coming weeks has tugged at the heartstrings of politicians and public alike. Should we be mourning the loss of a national treasure or celebrating the bright future of an organisation newly freed from state control?
The privatisation of Royal Mail will involve the government selling shares in the company to institutional investors, such as hedge funds, pension funds and the general public, giving everyone the chance to own a slice of the postal pie. Moreover, 10% of the shares will be earmarked for Royal Mail employees, who will also be given the opportunity to purchase additional shares at a discounted price.
There has been a great deal of opposition to this announcement, with hostility primarily stemming from the fact that Royal Mail is now making a profit. Indeed, its financial results show that the state-owned postal service made £403 million in operating profit in its latest financial year. This does not alter the case for privatisation. On the contrary, it paves the way for it.
The return to profitability shows that its management, led by chief executive Moya Greene, is on the right track to reforming its core business. Furthermore, the postal service now looks more attractive to potential investors, with the government expecting the sale to make up to £3 billion.
Giving Royal Mail access to private capital is essential for continued growth due to the rapid evolution of the delivery market. Despite the fall in letter services, this core business component still accounts for nearly 50% of the company’s turnover. As email and other forms of electronic communication grow in popularity, Royal Mail should focus its resources on parcel delivery. Thanks to the growth of e-commerce, parcel services are accelerating. The company needs funds that would allow them to finance new technologies and equipment in order to adapt in a changing market. Needless to say, these should not come from the taxpayer but from private investors.
Giving Royal Mail access to private capital is essential for continued growth due to the rapid evolution of the delivery market.
This is not a proposition that the public should be scared of. By letting the company step back from the state, it will have greater autonomy to set its own prices and invest in its parcels division, with the possibility of gaining a larger share in the global market. Sure, an age-old public institution will now be a commercial enterprise, but this will enable it to grow without taxpayers’ support whilst continuing to deliver a first-class service to its customers worldwide.
Roland Mortimer is an entrepreneur, web developer and economist currently taking a gap year before studying Economics at university. He is the editor of ROM Economics, an economics education and learning resource, and a contributor to various websites including Libertarian Home.