Improving Royal Mail slated for 2013 sell-off

The offering, which could take place if the state-owned postal operator’s finances continue to improve, is expected to raise between £3bn to £4bn, the Financial Times said.

The Government would be attracted to a stock market flotation if the financial climate for initial public offerings improves, the newspaper claimed.

There is speculation that a flotation would involve a sale of shares to the public as well as institutions, backed by a marketing effort.

Privatisation is likely to begin with a partial sell-off, with the rest sold later, but a full sale at the outset has not been ruled out, the newspaper said. It was reported that Royal Mail employees would get a stake of at least 10 per cent when privatisation is completed, while the Post Office network would remain in the public sector and may be mutualised. A Royal Mail spokesman declined to comment on the report.

The Royal Mail delivers about 59 million items every day to 29 million British addresses.

Under a major programme of job cuts, Royal Mail shed about 5,000 workers during 2011, including almost 2,000 in its head office and among other managerial roles.

Industry regulator Ofcom has proposed that the Royal Mail, which made a £120m loss on its letters business in the financial year 2010 to 2011, will be able to charge as much as it wants in the future for first-class stamps.

In November last year, Royal Mail revealed that its first-half operating earnings more than trebled as higher profit from branch and express parcel operations offset persistent losses on letter delivery.

At the time, Royal Mail said trading conditions would remain challenging and it would explore more cost cuts, while remaining committed to deliveries every day except Sunday.

In January, the Government revealed that it had secured the future of the Post Office under a 10-year deal, which gives certainty to postmasters.

The long-term arrangements between the Post Office and the Royal Mail will be reached before the two are separated under the Government’s controversial privatisation plans.

Sub-postmasters welcomed the move, but the Communication Workers Union said it was the end of an era for a fully publicly-owned postal service.

Speaking in January, the then Postal Affairs Minister Edward Davey, said: “On coming to office, we found a demoralised Post Office, still losing substantial sums despite years of cutbacks and closures. So, a year ago, I set out a radical plan to transform Post Office’s future, with £1.34bn of Government support and investment but without any closure programmes.

“Since then the Post Office has made good progress to become more competitive, building on its strengths.”

The UK postal service can trace its roots back to 1635.