Long read: Royal Mail and CWU dispute at crucial juncture amid reports of administration and further strikes

In a sweltering conference hall in York last July, general secretary of the Communication Workers Union (CWU) Dave Ward announced to thunderous applause the results of a first ballot on industrial action against Royal Mail. Frustrated at a pay offer which lagged way behind skyrocketing inflation, and broader changes to their conditions, workers had emphatically voted to strike, with 97.6% in favour on a turnout of 77%.

Six months on, after two more ballots yielding similar results, 18 days of strike action, numerous rounds of talks, improved offers, threats of job cuts,doomladen financial statements and a pair of jaw-dropping select committee hearings, CWU and Royal Mail are yet to resolve the dispute.

The dispute has seen some of the biggest mandates for industrial action in recent history, and is particularly notable as the largest private sector dispute to have emerged during a period of heightened industrial tensions, with more than 115,000 workers involved.

In many ways it is shaped by Royal Mail’s status as a relatively recent privatisation-case, with its residual obligation to the taxpayer to deliver letters six-days per week - known as the Universal Service Obligation (USO) - while competing against under-regulated firms in the emerging parcel market.

This looming threat from firms which do not offer even the existing levels of pay and working conditions that Royal Mail provides workers is leveraged by both sides in the dispute: Royal Mail say they need to make changes to compete with these firms, while the CWU warns workers that unless they take a stand Royal Mail will become another gig economy-style employer.

As it has raged on, Royal Mail has issued a number of performance announcements showing significant losses which it attributes primarily to strike action - £295 million in the first nine months of the last financial year - and has warned of mass lay-offs. Workers have reacted poorly to these cries of financial hardship, given the massive profits, dividends and executive pay packets reported by the group last year.

Also colouring the dispute is speculation that Royal Mail’s parent company, International Distribution Services, is being eyed up for a buyout by Czech investor Daniel Kretinsky, who has upped his stake in the firm in recent days.

Royal Mail’s problems do not begin and end with the industrial dispute. A cyber incident resulting in issues with overseas mail over a prolonged period caused chaos in the company, and top executive Simon Thompson has had a torrid time in parliament at the hands of the Business, Energy and Industrial Strategy (BEIS) select committee, resulting in the parliamentary body referring Royal Mail to regulators over a failure to maintain its USO.

What is the dispute over?

The dispute relates to pay and working conditions for Royal Mail workers, with a wide range of issues in contention, including changes to start and finish times, sick pay and attendance policies, and issues with owner drivers which the union has likened to Uber-style employment.

Last year, Royal Mail unilaterally imposed a below-inflation pay rise of 2%, offering a further 3.5% subject to agreement on a number of changes to working practices, and a new bonus. The company sent out a letter to workers laying out the proposed changes, which one CWU rep and postal worker described at the time as, “an eight-page document explaining how they’re going to mug us”. Workers now report that some of the unpopular changes are already being put into effect by managers.

Royal Mail says it is now offering a package worth up to 9% over two years, which CWU has described as “not enough,” particularly as the company has refused to offer additional cash for last year and back pay.

The company says it is “committed to getting the right deal,” and played down the reports about administration, saying: “If there was any material change to what we said in our most recent trading statement we would have a regulatory obligation to communicate”.

A Royal Mail spokesperson said: “After 11 months of talks, making numerous improvements to our offer based on CWU feedback, and mediated talks by Acas and Sir Brendan Barber, we are deeply concerned that we have yet to reach an agreement.

“It is not sustainable for the business to be losing more than £1 million a day. Change cannot continue to be delayed If CWU persists with further strike action, this would only serve to threaten the job security of our postmen and women and make our pay offer unaffordable.”

What is the latest on the dispute?

By early January, the union said it had made significant progress on a deal, including a guarantee from the company not to carry out any compulsory redundancies. As a result, CWU agreed not to call future strikes that month.

In February, as talks continued, workers voted in favour of continued strike action again if necessary, renewing the mandate secured in July with a similarly emphatic majority. That support for action had hardly dropped after six months and 18 days of unpaid striking was taken by union leadership as a clear message from members to carry on until a reasonable deal was on the table.

Aside from a 48-hour strike in February which did not go ahead, the union has not called for strike action yet this year, interpreted by many as a sign that talks were moving in the right direction.

Throughout February and March, it was reported that talks were making progress, with much made of the presence of former Trade Union Congress general secretary Brendan Barber as a facilitator.

In recent days though a prevailing sense of optimism about a deal being on the horizon has dissipated, amid reports that Royal Mail told the union that if they did not accept the deal on offer the company would have to consider going into a special form of administration, risking jobs and the long term future of the business.

Various outlets have reported that discussions are on the verge of breaking down, after a source told the BBC that “administration is a real possibility for Royal Mail if the industrial action continues,” adding, “it is not a negotiating ploy”.

This would likely see the part of the business which handles letter delivery and is not profit-making split off from the rest of the company, including Parcelforce, which is profitable.

This news has been met with concern by many Royal Mail workers. In response, CWU has threatened further strike action and sent out a flurry of communications to members setting out their position - although some workers have criticised the union for not sharing enough detail about the specifics of negotiations.

MPs have also weighed in, with BEIS committee chair Darren Jones tweeting that he would “monitor the situation”.

He wrote: “It would be a scandalous outcome of the privatisation of Royal Mail if shareholders and bosses are able to walk away with a spun out profitable part of the business, alongside their huge salaries, bonuses and dividends with no consequences”.

The latest sticking point could be Royal Mail’s handling of disciplinary cases involving striking workers and union representatives. The CWU says a number of sacked workers have been “victimised… on the most ridiculous pretences” for their involvement with the union, while Royal Mail claims that a small number of instances of unacceptable behaviour have been investigated and “appropriate action has been taken”.

An update sent out by the union to members this week highlighted a number of key areas where agreement is yet to be reached, while the Telegraph reported on Tuesday (28 March) that Royal Mail had given CWU 48 hours to accept the deal on the table.

Among the main issues cited by CWU were pay, later starts, sick pay, owner drivers, and conduct cases.

A CWU spokesperson said: “It is clear Royal Mail Group are in a serious financial situation. This is as a direct result of mismanagement and recklessness at the most senior level of the company. Those individuals who have led the company into this crisis have no right to lead us out of it.

“The company as a whole now have a decision to make – do they reach an agreement with the union or do they continue their relentless and daily assault on postal workers in workplaces across the UK? There is no positive future for Royal Mail without the support of the workforce.”