Royal Mail: Czech Sphinx’s six-day service pledge a litmus test for Labour

The billionaire behind the Royal Mail bid, Daniel Kretinsky, has vowed to keep the national postal service operating six days a week, a move that is difficult for Labour to brush aside, according to analysts.

Kretinsky, known by many as the Czech Sphinx, has pledged to maintain the current Universal Service Obligation (USO), which mandates Royal Mail to deliver letters six days a week if the government approves his EP Group’s takeover of the British institution.

Royal Mail has been seeking to reform the USO, with proposals including a slower first-class service and reducing the number of delivery days from six to three.

“As long as I’m alive, I completely exclude this,” Kretinsky told the BBC.

This statement will undoubtedly please the unions, which have historically opposed Royal Mail’s efforts to reduce deliveries.

However, Martin Walsh, deputy general secretary of the Communication Workers Union, recently argued the USO as a six-day option is “no longer financially viable.”

It may also make it easier for Labour to wave through the deal, especially if the new government wants to prove its pro-business credentials.

“Labour does not want to nationalise Royal Mail and Kretinsky is making it as easy as possible for them and Ofcom to give their consent,” Peel Hunt analyst Alexander Paterson told City A.M.

“However, that does not mean either will roll over and simply agree. I’m sure, given the highly politicised nature of Royal Mail, Labour (and Ofcom) will want to make it look like they are investigating thoroughly,” he added.

Kretinsky’s £3.6bn offer, which the Royal Mail board accepted in May, valued it at £5bn, including assumed debts.

Shareholders are expected to give the green light on 25 September, but the government can also block the deal.

The Labour party has promised to “robustly scrutinise” the first foreign takeover of the 500-year-old British institution.

Kretinsky has pledged to maintain Saturday first-class deliveries, preserve the Royal Mail brand, and keep the headquarters and tax base in the UK to sweeten the deal for Labour.

He’s even dangled a profit-sharing scheme to entice union bosses.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, told City A.M.: “Getting union leaders onside should bolster political support, and this pledge to keep the six-day service may go some way in appeasing their concerns, as it would help allay fears of further job losses among postmen and women.

As other demands like staff ownership look unlikely, she added: “Another way of giving staff ‘a stake in the business’ as demanded by unions would be in the form of a greater governance role for worker representatives.

“In the Czech Republic, employees have a third of the seats on supervisory boards of largely privately owned companies, following a change in the law in 2017. Given his experience owning a raft of Czech companies, it’s likely Mr Kretinsky would be at ease with greater employee representation,” Streeter explained.

The news follows speculation that Kretinsky’s EP Group has worked up plans to make an £800m investment into Royal Mail as part of the billionaire’s aims to dominate the UK’s parcel market. The investment would help the company slash delivery prices and dethrone major rival Amazon by introducing 20,000 parcel lockers.