Royal Mail investment

Royal Mail

Thursday, 18, May 2006 12:00

State-owned Royal Mail is to receive £1.75 billion from the government, to modernise equipment and offset its pension funds deficit.

This includes a £900 million loan to be repaid by 2013 at commercial rates of interest. The other £850 million is in the Royal Mail reserves, which cannot usually be accessed by the company due to arrangements with the government.

The money will contribute to lessening the pensions deficit of £5.6 billion, and updating its equipment, bringing it in line with competitors.

The government has also promised that for the next two years Post Office Ltd expenditure will be paid by the Treasury, not Royal Mail reserves.

The company has announced a profit of £355 million this year to March, a 17.5 per cent increase on last year.

Competitors are likely to argue that the package amounts to a government "subsidy", giving the company an unfair competitive advantage, but Royal Mail insists it is an investment that will deliver returns for the taxpayer.

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