Royal Mail ‘poised for £30m General Election windfall’

royal mail 2Royal Mail’s success in heading off a damaging strike is likely to trigger a £30m pre-Christmas bonus for the company in the run-up to the General Election on December 12, according to a leading City analyst.

While most of media coverage has predicted that online ads will dominate, City broking, advisory and trading house Peel Hunt insists Royal Mail will see a major volume boost from both election mail and postal votes.

It is not known how Peel Hunt came up with the figure, however; in the 2017 election, the Conservatives spent £18.6m across all media, while Labour came in at £11m and the Liberal Democrats at £6.8m.

Direct mail only accounted for a small proportion of that spend, although each candidate standing in an election is entitled to send one communication via Royal Mail, through so-called “Candidate Mail”.

However, there is the not inconsiderable matter of 48 million voting cards to be delivered. In 2017, there were also 8.4 million postal votes issued, representing 18.0% of all electors. This compares with 16.4% in 2015 and 15.3% in 2010.

Even so, Peel Hunt analyst Alexander Paterson warned that “strained relations” between Royal Mail management and the Communications Workers Union were likely to continue to cause disruption.

He added: “We anticipate that the CWU will hold another ballot and will strike next year, albeit most likely with a vote in favour below the 97% achieved in the October ballot.”

The company is due to report its half-year results on Thursday, when it will update shareholders on the progress of its £1.8bn investment drive to turn round the UK business.

Observers will also be keeping a close eye on direct mail volumes. According to “The Outlook for UK Letter Volumes to 2028” report, commissioned by Royal Mail and drawn up PwC division Strategy&, there will be a “short term high rate of decline” in direct mail volumes of up to 8% until at least 2020.

However, it forecast that from 2020 onwards, the rate of decline will slow, driven by perceived ongoing value of direct mail as a marketing channel, supported by both interview and business survey feedback.

The report predicted that initiatives such as Jicmail and Partially Addressed Mail will also benefit the market.

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