Royal Mail posts a profits collapse

Royal Mail's first-half profits have collapsed by almost three quarters to just £52 million as the number of letters posted in Britain continues to fall.

The state-owned group's letters business fell £66 million into the red in the six months to September 26 compared with a £48 million profit last year.

It handles just 68 million letters a day compared with 84 million five years ago, suffering from the competition of email and social media.

Royal Mail's overall operating profits dropped to £52 million from £184 million. It cut 2,800 jobs in the half-year, largely from the letters business.

Profits at Post Office also more than halved over the six months, to £20 million. Royal Mail said revenues were hit by a decline in traditional business, such as benefit payments by the Post Office Account, and lower demand for services including foreign currency.

Chief executive Moya Greene, the former head of Canada Post, said: "With widespread predictions in the postal world that mail volumes will continue falling, perhaps by up to 40% over the next five years in the UK, it's absolutely vital we step up the pace of modernisation."

Last month the Government announced Royal Mail was to be privatised. It is pushing the Postal Services Bill through Parliament to enable private capital to be injected and will take on Royal Mail's £8 billion in pension liabilities to smooth the path for privatisation.

A Department for Business spokesman said: "These results really bring home the need for the action. Letter volumes have fallen by 5% in six months and Royal Mail continues to lose money. The situation is not sustainable and that is why we are pressing ahead with our plans."

The privatisation plans face stiff opposition from the Communication Workers Union. Billy Hayes, general secretary, said: "Today's results are the strongest argument yet for keeping Royal mail publicly owned and fully integrated.

"Overall there was a group profit and the quality of service has been maintained - would anyone expect a private company to provide the universal service and good quality of service in this context?"