Royal Mail takes axe to jobs after going private

Royal Mail plans to axe 1,600 jobs under a fresh cost-cutting programme, Britain's main postal operator said on Tuesday six months after its controversial part-privatisation by the government. The company said that most of the jobs to go would be in management, with no delivery staff losing their positions. It added in a statement that it would create "300 new or enhanced roles", resulting in a net loss of 1,300 jobs. Royal Mail is shedding about 1.0 percent of its total workforce. The changes are expected to deliver annualised cost savings of around £50 million ($82.5 million, 60 million euros), it said. Royal Mail chief executive Moya Greene said the cuts were necessary for the company "to effectively compete in the letters and parcels markets". A senior official at Britain's largest union Unite warned of strike action in the case of compulsory redundancies. "First the government sells off Royal Mail on the cheap and now the newly privatised service is ruthlessly sacrificing jobs," Brian Scott said in a statement. "It's more proof that Royal Mail's primary reason for existing is now about making profits rather than serving the nation," he added. Royal Mail shares lost 1.63 percent to stand at 574.5 pence in afternoon trading on London's benchmark FTSE 100 index, which was strongly higher overall. "Investors saw their shares fall out of favour... as plans to shed 1,600 staff were met with threats of industrial action from union bosses," said CMC Markets trader Alexander Young in a note to clients. Royal Mail shares floated in October valued at just 330 pence, 74 percent below the current price. The coalition government last year sold off more than half of Royal Mail but has since been accused of selling the company too cheaply. Ministers argue that the flotation price encouraged buyers onto the market, while the partial-sale formed part of the government's drive to slash Britain's budget deficit. Strongly opposed to the change in ownership, union bosses argue that service has suffered. The government has long insisted that partial privatisation will allow Royal Mail the freedom to raise capital, continue modernising and meet booming demand for online shopping that generates parcel traffic. The privatisation was the biggest by a British government since the late prime minister Margaret Thatcher sold off former state-owned companies British Gas and British Telecom in the 1980s. Privatisation of Royal Mail saw its around 150,000 staff receive a free stake in the business, in the largest employee share scheme of any major British flotation for almost 30 years. Ahead of the privatisation, Royal Mail had announced a surge in profits thanks to the increasing popularity of online shopping, and owing also to deep cost-cutting and big increases in stamp prices.