The share price of Royal Mail has fallen this morning (March 25th) after the company announced it is to make hundreds of members of staff redundant to save money.
Just months after the privatisation of the postal service, Royal Mail confirmed it is looking to cut more than 1,500 positions to improve its financial position.
Stocks in Royal Mail shot up when they were floated on the London Stock Exchange towards the end of last year, which led to the government being accused of selling off the company cheaply.
Royal Mail chief executive Moya Greene described the cutbacks as "necessary" if the firm is to be able to "effectively compete in the letters and parcels markets".
But the Unite union responded angrily to the news, with 50,000 of Royal Mail's employees having left since 2003. Brian Scott, Unite officer for Royal Mail, pointed out that the primary purpose of Royal Mail is now to make profits, rather than to serve the general public in the UK. Consultation with Unite and other linked unions to Royal Mail is set to begin today.
He said: "Unite is demanding a commitment to no compulsory redundancies on fair terms and an effective method for redeployment within the restructured organisation. If Royal Mail refuse we will have no alternative than to consider a ballot for industrial action."
The cost of the cutbacks is expected to total £100 million, it was announced by Royal Mail. The company also revealed that its cumulative "transformation" costs for 2013-14 are now going to rise to £230 million. This is some £70 million higher than the firm's previous estimate.
Stocks in Royal Mail fell this morning on the back of the announcement of the job losses. By 08:30 GMT, the share price of the company was down by 0.68 per cent compared to the start of the session. Stocks were trading at around the 568.00 mark, which is still a considerable way above the firm's starting price last year.
Find up to date information on the FTSE 100 and spread betting strategies at City Index
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.