UK to privatise majority of Royal Mail

Royal Mail will be sold by the British government through flotation on the London Stock Exchange. Source: AAP

BRITAIN'S government has announced plans to privatise more than half of Royal Mail following a major restructuring in recent years triggered by a surge in email use.

Business Secretary Vince Cable told parliament that the coalition government planned to "dispose of a majority stake", which would include 10 per cent of the company being handed to employees in the form of free shares.

Cable, a member of the Liberal Democrats which share power with Prime Minister David Cameron's Conservatives, said the government would seek to hold an initial public offering (IPO) for Royal Mail shares by the end of the current financial year that ends next March.

"This is logical, it is a commercial decision designed to put Royal Mail's future onto a long term sustainable basis," Cable told parliament.

"It is consistent with developments elsewhere in Europe where privatised operators in Austria, Germany and Belgium produce profit margins far higher than the Royal Mail but have continued to provide high quality and expanding services."

The Communication Workers Union (CWU) on Wednesday said it would ballot members over strike action unless a legally binding deal on employee terms and conditions could be agreed with any potential new owner.

"I really do not understand what the government are trying to achieve by this," said CWU deputy leader Dave Ward.

"If you think about the profits the Royal Mail are now making, there's no need for it to be privatised. What privatisation will do is destroy the UK's universal postal service.

"There's no way private companies can maintain six-day-a-week deliveries to every single address in the UK," he added.

Royal Mail has recently enjoyed a surge in annual profits thanks to the increasing popularity of online shopping which generates parcel traffic, and owing also to deep cost-cutting and big increases in stamp prices.

Media reports say the part sale of Royal Mail could worth up to STG3.0 billion ($A4.89 billion).

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