Royal Mail axing 2000 management jobs to slash costs

Around 2000 management jobs are being axed at Royal Mail as it looks to slash costs in the face of the coronavirus pandemic.

The group said the job cuts come as part of a management overhaul under plans to save £330m over the next two years.

The cull will affect some of its 9,700 managers, with senior executive and non-operational roles hardest hit.

Royal Mail is one of a raft of companies in the UK to announce hefty job losses due to the pandemic, including British Gas owner Centrica and airlines easyJet and British Airways.

Keith Williams, interim executive chairman at Royal Mail Group, said the firm is taking “immediate action” on costs to offset the Covid-19 impact.

He said: “In recent years, our UK business has not adapted quickly enough to the changes in our marketplace of more parcels and fewer letters.

“Covid-19 has accelerated those trends, presenting additional challenges.”

On the job cuts, he said: “We are committed to conducting the upcoming consultation process carefully and sensitively.

“We will work closely with our managers and their representatives during this difficult period.”

The job cuts will affect nearly half of Royal Mail’s senior managers, while it will see a 20% reduction in management roles across office functions and 10% drop in frontline operational management.

It aims to take a “phased approach” to the redundancies but all are set to take place by the end of next March.

Details of the job cuts came as Royal Mail posted a 13.6% fall in group underlying operating profits to £325m for the year to March 29 – but its core Royal Mail division suffered a 41.2% plunge in earnings.

Shares fell 6% as it also warned it could take a revenue hit of up to £600m if Britain suffers a deep and longer-lasting recession caused by the pandemic – a scenario where the gross domestic product (GDP) falls by 15% across 2020-21.

It said this would also see it take £155 million of costs related to the crisis and £110m due to surging numbers of parcel deliveries.

Even in the less gloomy scenario where GDP falls by 10% over 2020-21 and lockdown restrictions continue to ease, Royal Mail still sees a revenues impact of up to £250m and £250m in extra costs.

Royal Mail said executive directors and Royal Mail executives will forgo annual bonuses for 2019-20 and no shareholder dividends will be paid for the year ahead.

Royal Mail saw former chief executive Rico Back quit unexpectedly last month after less than two years in the job and battles with unions.

He was replaced on an interim basis by chairman Keith Williams.

Full-year results showed underlying pre-tax profits slumped 31% to £275m.

The earnings drop came even after its better performing international ground-based parcel arm GLS saw a 17.5% hike to £208m.

The company was unable to take advantage of a massive spike in parcels being sent through the post during lockdown.

In April Royal Mail’s frontline workers braved the pandemic to deliver 36 million more parcels.

But social distancing ate through the benefit at Royal Mail as costs were sent soaring.

Unite union official Mike Eatwell said: “The announcement today by Royal Mail to sack 2,000 managers is a classic example of trying to reposition a business to create a viable long-term future while feeling under pressure to make short-term cuts that only hinder that transition.

“It also deflects attention from where the real problems lie.

“Poor decision-making at the top of Royal Mail in the past has failed to recognise the pace in the decline in the volume of letters, and there has been a too-slow investment in technology and facilities to keep abreast of the huge growth in parcels.

“This scenario has been made worse by the adverse impact of coronavirus on the economy.”