Royal Mail takes £200mn hit from postal strikes

Royal Mail has taken a £200mn hit from strikes as it races to restore customers’ faith in its services amid an ongoing dispute with postal workers and a damaging cyber attack.

The UK delivery group’s parent company, International Distribution Services, said on Thursday that 18 days of staff walkouts pushed it to a £295mn adjusted operating loss during the nine months to December.

It has also restarted deliveries of parcels overseas more than a fortnight after a cyber attack crippled its international services.

The financial blow comes after bumper profits during the Covid-19 pandemic thanks to a boom in online orders.

It warned of losses between £350mn and £450mn for the full year, which could deepen if there is further strike action.

Alexander Irving, an analyst at Bernstein, said that these forecasts appeared “overly optimistic”, with industrial action likely to continue.

Management remains locked in a bitter dispute with the Communication Workers Union over pay and employment terms about half a year after postal workers first voted to go on strike.

Jenny Hall, Royal Mail’s director of corporate affairs, said the two sides “didn’t make the progress needed” during a second round of intensive talks that were supposed to end last Friday. Further talks are taking place, she said, but added the union was focused on securing a mandate for further strike action in a second ballot, with results to be declared next month.

Meanwhile the company continues to grapple with the fallout from a cyber incident that shut down its foreign delivery service.

Although Royal Mail said it has found workarounds to restart its more expensive export services, the company is still asking customers not to post parcels abroad through its economy service. 

Royal Mail said it is targeting a return to profit during the financial year ending 2025, but warned that it will need to dispose of assets to generate positive cash flow this year. 

During the three months to December, as the group was hit by several strike days in the lead up to the peak Christmas period, the number of parcels it handled dropped 27 per cent to 321mn.