England's trusty mail carriers have plunged the country into uncertainty by staging a two-day strike last week, with three more mail-less days scheduled to begin on Thursday. In a country where locals used to set their watches by the clatter of the mail slipping through their letterboxes, often twice a day, this seems to cut to the core of British identity.
By some estimates, the strike threatens to cost the already hobbled U.K. economy up to £1.5 billion ($2.5 billion) in lost business. So Prime Minister Gordon Brown has spoken up, calling for the Royal Mail and the striking Communications Workers Union to get back to the negotiating table. "This strike will be self-defeating if all it means is that less people use the Royal Mail," Brown told the BBC.
Already, businesses are turning away from the increasingly unreliable service, which traces its roots back to the time of Henry VIII, with many customers relying on alternative delivery systems. "Anything timely or important goes by DHL (DPSTY) or Federal Express (FDX)," says Peter Moss, vice president of investor relations and corporate development at Max Petroleum Plc. "Ninety-nine percent of what we get through the Royal Mail is junk mail." Likewise, the Economist magazine has turned to a hand-delivery service, "To guarantee prompt arrival of your Economist each week."
It's no wonder that the Royal Mail, which is owned by the government, has already lost £232 million ($379 million) this year, according to its shareholder report. Royal Mail says the total volume of letters it handled fell 5.5 percent over the past year, and it's predicting another 10 percent drop next year.
After many failed attempts to heal the business, the Royal Mail now says the only solution is to modernize. Its new high-tech "walk sequencing" machine may be the answer, promising to do the work of hundreds of mailmen in minutes. That's an ominous prospect for the Communications Workers Union, which fears that this will lead to drastic staff cuts.
The United States Postal Service didn't hesitate to modernize when it came under siege from the Internet and rival delivery services such as UPS (UPS) and Fed Ex. After suffering similar declines in mail volume, the postal service became more automated and consolidated its facilities – without enduring a strike.
In an effort to contend with a backlog that could reach 100 million items, the Royal Mail has farmed out the letter sorting and other postal duties to 30,000 temporary workers, who will be paid the minimum wage of £5.73 ($9.37) per hour. According to the Mail Online, many have landed their jobs with only the most cursory of background checks -- some admitting they have criminal convictions. This is quite a risk for the beleaguered delivery company: In 2006, the Royal Mail was fined £11.4 million for a failure to thoroughly investigate workers' backgrounds after admitting that 14 million packages and letters had been damaged, lost or stolen.
After months of staging moderately disruptive one-day strikes throughout the country, the union has scheduled the current strikes for the run-up to Christmas season, ensuring maximum damage to the ailing Royal Mail. The effects are already being felt as the mail service loses enormous mail contracts to private companies. Last week, the Royal Mail lost out on an £8 million ($13 million) contract to deliver government post in Scotland. Private courier TNT won the bid, coming in at a lower cost, for what we can only assume will be better (and continuous) service.
Businesses such as Amazon.com (AMZN) have been forced to seek other methods of delivery, regardless of increased cost, or risk masses of canceled orders and irate customers. The online retailer told DailyFinance, "We will be doing everything we can to ensure that Amazon customer orders are not disrupted, including routing orders through our other carrier partners."
So far, the strikers are not inspiring much sympathy, even from their most loyal supporters. "There are enough alternatives now for people to move elsewhere," says long-time London resident Marilyn Green, who says she has been reliably served by the city's busiest post office for decades. "The postmen are terrific, but I think they're committing suicide by going on strike."
Take the first steps to building your portfolio.View Course »