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Royal Mail (IDS) Shares Face Bleak Future As Strikes Continue

Simon Mugo trader
Updated 5 Dec 2022

The Royal Mail share price, now known as International Distributions Services PLC (LON: IDS), faces an uncertain future as the Communication Workers Union (CWU) forges ahead with its strikes planned for 9, 11, 14, 15, 23 and 24 December.

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YOUR CAPITAL IS AT RISK. 81% OF RETAIL CFD ACCOUNTS LOSE MONEY.


Communication between the worker’s union representing 115,000 Royal Mail employees and the management team is at a stalemate, with the management ending negotiations following the latest strikes.

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YOUR CAPITAL IS AT RISK. 68% OF RETAIL CFD ACCOUNTS LOSE MONEY

The mail and parcels company has offered employees a 9% salary increase. However, the CWU has rejected the offer saying it still leaves workers at a disadvantage given the record-high inflation in the United Kingdom and the high cost of living. 

Royal Mail has told its customers to brace for the disruptions. The firm has brought forward the deadlines for delivering some second-class and first-class mail to compensate for the disruptions caused by the industrial action. 

The lack of a resolution to the pay dispute between the CWU and Royal Mail puts the entire company in grave danger, given the massive losses incurred this year. As investors, we must ask, how long can the company keep operating at a loss with the massive disruptions created by industrial action?

The short answer is the current stalemate is not sustainable, and if it continues, Royal Mail could face further trouble. Furthermore, the IDS management team has hinted at separating Royal Mail from its profitable international business known as GLS since the UK business is dragging down the entire firm’s results. 

If the IDS board decides to move forward and separate the two businesses, Royal Mail could easily file for certain measures as a standalone business. Both sides must make concessions for a resolution, but this has yet to happen. 

Royal Mail is at a crucial stage where it has to change its business to remain competitive. However, the CWU has opposed the proposed changes saying that they would turn its members into gig-economy workers. 

Unfortunately, the parcel delivery industry has shifted to the gig-economy operating model, which is why Royal Mail is facing an existential crisis if it stays the same. I hope the two sides will reach a deal soon to save the company.

*This is not investment advice. 

The Royal Mail (IDS) share price. 

Source: IG.com

The Royal Mail (IDS) share price has fallen 4.99% in the past week and could fall further. 


YOUR CAPITAL IS AT RISK. 81% OF RETAIL CFD ACCOUNTS LOSE MONEY.


Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading