Government reaches legally binding agreement with EP Group that protects Royal Mail's workers and key services whilst keeping it headquartered in the UK
Business Secretary reaches agreement with Royal Mail's prospective new owners after in latest example of government working hand in hand with private sector to improve crucial public services.
Agreement backs Government's Plan for Change, creating the strong foundations needed in Britian's supply chain to kickstart economic growth and deliver for workers.
Deal protects workers and key services whilst seeing Royal Mail continue to be headquartered in Britain, securing jobs and tax receipts in the UK.
The Business Secretary, Jonathan Reynolds, has today [16 December] received legally binding commitments from Royal Mail bidder Daniel Křetínský that are intended to secure the long-term, sustainable future of Royal Mail whilst protecting crucial services for millions of customers across the UK.
This significant agreement, between the Department for Business and Trade and Daniel Křetínský's EP Group, contains commitments that protect, and secure investment in, Royal Mail's postal network which is important to everyone from small business owners in Southampton to online shoppers in Shetland.
These commitments deliver on the Government's Plan for Change, kickstarting economic growth by providing stability to a national institution that strengthens the foundations of Britain's domestic supply chain and delivers better public services to people across the whole country.
Business Secretary Jonathan Reynolds said:
For too many years progress on securing a stable future at Royal Mail has stalled, but from day one we have been committed to providing a secure future for thousands of workers and customers.
Today's agreement is yet another example of this Government's commitment to working hand in hand with business to generate reform give respite to people right across the UK, as we are working towards ensuring a financially stable Royal Mail with protected links between communities other providers can't reach.
I'd like to thank EP Group and Daniel Křetínský for their constructive approach to our discussions and their commitment to protecting this national icon. I look forward to working with them to fix the foundations and ensure Royal Mail continues to deliver for the communities and businesses who rely on it most.
Recognising the importance of Royal Mail as an iconic national institution, the government has negotiated a 'Golden Share' which will ensure that, with very limited exception, the headquarters of Royal Mail cannot be moved abroad and that Royal Mail cannot change where it pays its taxes, in either case without UK government approval.
These restrictions will apply to any future owners of Royal Mail and, alongside other commitments to the brand and cypher, secure Royal Mail's identity as an iconic British institution whilst also allowing it to operate as a fully private company without day-to-day government interference.
EP Group have also committed to honour any new agreements entered into with the postal unions, recognising that workers should be placed at the heart of a sustainable Royal Mail.
After months of constructive engagement, these legally binding commitments were voluntarily offered by EP Group in recognition of the significant contribution that Royal Mail makes to Britain's national identity and the importance that it has in everyday life in the UK.
EP Group Chairman Daniel Křetínský said:
EP Group is very pleased to have reached this historic agreement with the Business Secretary to safeguard the future of Royal Mail, under EP Group ownership.
We would like to thank the Business Secretary for the constructive negotiations that have resulted in unprecedented commitments and undertakings that demonstrate the high regard EP Group has for Royal Mail as an institution, the service it provides to millions of UK homes and businesses, and Royal Mail employees.
EP Group is a long term and committed investor with a mission to make Royal Mail a successful modern postal operator with high quality service and products for its customers. We look forward to delivering on this mission alongside our partners in government.
Millions of small businesses and consumers across the country rely on Royal Mail for everything from magazines to medicine deliveries, which is why protecting its future following any takeover is critical.
The commitment we have offered include significant financial safeguards including assurances around financial investment and restrictions on value extraction linked to the financial strength of the Royal Mail business and the achievement of specific service level standards.
Today EP Group has also announced that it has reached negotiators' agreements with the unions representing Royal Mail's workforce. The Government welcomes the negotiators' agreement and is confident that the constructive and collaborrative approach between the unions and the buyer can represent a restart for Royal Mail.
Postal Services Minister Justin Madders said:
We have agreed these commitments with EP Group with the intention of securing the best outcome possible for Royal Mail's customers, incentivising high performance and protecting the important services communities rely on.
Royal Mail's workers will also play a crucial role in getting the company back on track, and I'm pleased that EP Group and the CWU have worked quickly to reach an agreement on their part in the takeover.
A sustainable Royal Mail is a successful Royal Mail, and through this agreement we're paving the way towards a brighter future where it can be a source of national pride once again.
Communication Workers Union General Secretary Dave Ward said:
We are pleased to have reached a negotiators settlement with EP Group covering crucial areas such as job security, the governance of the company, a meaningful stake in the business for employees, restoring quality of service, legally binding commitments and improving the terms and conditions of our members.
This agreement provides the foundation to rebuild Royal Mail. These have been challenging negotiations but through the support of our members we have delivered what by any measure is a groundbreaking agreement which puts postal workers and customers back at heart of everything Royal Mail does.
Notes
Summary - EP Group / DBT - Deed of Undertaking
Institutional Stability
Significant commitments to provide certainty over Royal Mail's [and IDS's] position as a key UK business, including:
Amending the Royal Mail Articles of Association, to ensure that HMG permission is sought before moving Royal Mail's HQ, central operations or tax residency out of the UK (by way of a 'Golden Share' owned by HMG).
Committing to IDS retaining its HQ and tax residency in the UK for at least five years.
Ensuring that the Secretary of State is notified prior to the onward sale of the Royal Mail Group (RMG).
Ensuring the Royal Mail brand is protected.
Committing to no change in the control of GLS or Royal Mail for three years.
Financial Sustainability
Commitments from EP to maximise the chances of Royal Mail's financial success by:
Committing to prevent value extraction (subject to limited exceptions) until two tests are satisfied:
A financial test that considers the debts of RMG so that value cannot be extracted if the company is heavily indebted.
A quality test to ensure that value is not extracted unless RMG has maintained or improved its performance as against its 2023-24 quality of service performance.
Restructuring the RMG balance sheet to remove an existing, substantial intra-group debt.
Ensuring RMG retains ownership or control of, or access to, assets necessary to deliver the universal service obligation.
Ensuring that Royal Mail has sufficient financial means to meet the planned capital expenditure required to implement its transformation agenda over the next three years.
Other than in the context of the existing IDS bonds, ensuring that RMG does not assume liability for any non-RMG debt (including any refinancing of the acquisition debt) until such time as the return of value criteria above are met.
Regulatory Environment
Recognising the importance of postal services to UK citizens, there are further commitments from EP to:
- Meet the core regulatory requirements that RMG is subject to, including:
ensuring RMG is the universal service provider for as long as EP Group is in control; and
maintaining "one-price-goes-anywhere" service, with first class letters delivered six days a week.
Include a UK/British nationality requirement for at least two RMG directors.
Continue engagement, funding and participation with the Universal Postal Union (the UN Specialised Agency for international postal cooperation, which sets the rules for international mail exchanges and makes recommendations to boost mail, parcel and financial services volumes, while improving service quality).
If RMG were ever re-listed on a public stock exchange, commit to do so on the London Stock Exchange.
Consult certain Crown Dependencies & Overseas Territories on key proposals affecting their designated operators or changes to terms of service.
Maintain commitments for RMG to achieve net zero by 2040 and GLS to reach zero CO2 emissions by 2045, including by modernising and electrifying its fleet and cutting emissions.
Ensure HMG has sufficient access to RMG and information to monitor compliance with all undertakings.
Stakeholders
Royal Mail's workforce is an integral part of day-to-day life in the UK and the commitments from EP recognise this by:
Continuing to recognise the relevant postal-worker unions.
Committing to negotiate in good faith with the relevant unions and comply with any new agreements RMG enters into with those unions.
Not taking any amount of surplus from the Royal Mail Pension Plan out of RMG.
