“Things will get worse before they get better” at Royal Mail after its owner, International Distributions Services struck a deal with the Communication Workers Union (CWU) to settle their dispute over pay and working conditions.
Analysts at Liberum retain “significant concerns” about the execution of the deal, which will see posties receive a 10% pay rise alongside some changes in working patterns, with the impact on costs to be realised immediately while working practices will be phased in.
“Even if implementation is wholly successful (which would be at odds with recent history), things get worse before they get better, and the macro backdrop is deteriorating,” said the broker.
One problem that Royal Mail will face is that UK consumers are starting to lose faith in the reliability and convenience of parcel delivery services.
Data compiled by Quadient, an automation company that provides mailing equipment, found that nearly half (47%) of adults surveyed were worried about the way parcels are sent and that services will become more expensive while getting worse.
Quadient found that the main concerns among consumers centre around experiences of missed or stolen deliveries, the need to reduce emissions and unsatisfactory click-and-collect options.
Consumers are open to alternatives, which include combining a journey with picking up a parcel, which could replace the average 47 parcel delivery and pick-ups a day completed by couriers, a total of 1.4bn driven miles a year.
Liberum remained Sell on International Distributions Services, with a target price of 180p.