Threat of Industrial Action Tempered Royal Mail Growth in Q3

Royal Mail, the UK’s postal service, released today its trading update for the nine months ending 29 December 2019.

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Whilst the postal service’s financial performance has been largely in line with expectations, it also highlighted that the threat of industrial action (slowdown or strike) by the Communications Workers Union (CWU) during this period impacted growth in its parcel business.

“Total UK volumes were up 3% (4% working day adjusted), and revenue increased by 3.7% (4.9% working day adjusted). Around Black Friday and Cyber Monday volumes were higher than expected. For the rest of the Christmas period they were, on average, lower than anticipated. Due to the risk of industrial action, some customers switched volumes to other carriers. This reduced parcel revenue growth by approximately 0.5 percentage points.“

Royal Mail Moving Forward with Transformation

Growing impatient with the CWU’s threat of an industrial action, Royal Mail is forging forward with modernisation efforts and outlined specific actions it is taking to transform the postal service for the future.

• Royal Mail has chosen the supplier for automation of our Warrington parcel hub, which will handle 40,000 items per hour when fully operational. They are finalising the lease for its 2nd parcel hub in the Midlands. It will be able to handle 60,000 items per hour when first operational. Both hubs have the option to increase capacity in the future. Royal Mail is continuing to explore options for a 3rd (and final) hub.
• The company continues to roll out small Parcel Sorting Machines (PSMs). Over the Black Friday and Christmas period, Royal Mail almost doubled the number of parcels sorted automatically, to 39m from 22m last year.
• A further 7 letter sequencing machines were decommissioned in Q3, making a total of 24 year-to-date, as Royal Mail adapts its network to handle fewer letters and more parcels.
• Royal Mail is also deploying a range of much needed local change initiatives and key trials, which have been held up for many months.

On another positive note, the company stated that “Parcels performance in January was stronger than Q3, which underpins our confidence in a higher level of revenue and volume growth in Q4.”

Did the threat of an industrial action impact your choice of carrier during the busy holiday season?

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