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Department for
Business, Energy
UK Government & Industrial Strategy
Date: 4 March 2019
Director General: Mark Russell
Lead Official: Tom Aldred
Lead Official Telephone:
Recipient To Note / Comment To Approve / Decide
Permanent Secretary X
Secretary of State xX
Kelly Tolhurst xX
Official Sensitive: Post Office Limited (POL): Quarterly update
Summary
1. This is an update on Post Office Limited (POL), in advance of your meeting with Tim
Parker, the POL Chair, to discuss the Chair’s Letter sent on 4 February. It also
covers the information you requested following your meeting with the Secretary of
State on 4 March, including the questions raised by Kelly Tolhurst. We will provide
quarterly updates on an ongoing basis, copied to ministers for information.
Timing
2. You (Permanent Secretary) are meeting with Tim Parker on 5 March.
Advice
3. There is currently a lot going on at POL that is of interest to the Department. Key
issues include a leadership transition, the ongoing legal case, the continued closure
of crown branches and major changes to the business arising from the new Banking
Framework. Against this backdrop, financial performance has continued to improve,
such that we believe there is now an opportunity to consider whether and how POL
can pay dividends. There are also ongoing stakeholder challenges. This note covers
a lot of ground at a relatively high level.
4. We suggest you focus the meeting on the topics covered in the Chair's Letter of 4
February, which is attached at Annex A. In particular:
e Congratulate Tim Parker on POL’s successful financial performance, including
the projected increase in profits for 2018/19.
e Welcome POL’s engagement with UKGI and BEIS on major strategic issues
(such as the Banking Framework and Bank of Ireland negotiations) and on the
litigation trial.
e Listen to his frustrations at the slow pace of approval of executive appointments
and remuneration and ask about his proposals for how CEO and CFO
responsibilities will be covered prior to the appointment of a permanent CEO.
Emphasise that ministers care deeply about the Post Office, take an interest in
its operation and that due process must be followed.
e Ministers take a keen interest in the litigation trials, the Crown franchising
programme and in postmaster pay, and the need to ensure that government is
kept fully appraised of developments.
e Ask POL to engage UKGI and BEIS on the development of POL’s future strategy.
The increased profile of Post Offices in providing cash banking services, and the
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higher income that POL will derive from this, have the potential to fundamentally
reshape the business. The implications of this should be considered alongside
POL’s emerging retail strategy and government’s objective that POL be
financially self-sustaining by 2021.
Litigation case — the ‘Common Issues’ and ‘Horizon’ trials
5. Litigation. A judgment in the Post Office Common Issues trial will be sent to the
parties next week (w/c 4 March), under strict embargo, before being formally handed
down in the following week (w/c 11 March). In line with standard court procedure,
the judgment will not be made available to ministers before its public release.
Ministers have asked for advice on whether to seek the judge’s permission to allow
ministers advanced sight of the judgment. BEIS and UKGI legal teams advise that
permission is not sought.
6. As well as being highly unlikely to succeed, the application for permission would be
made public. An application would run counter to the position the Department has
taken thus far regarding this litigation (including in Parliamentary Questions), namely
that it is an operational matter for POL.
7. The full judgment is likely to run to hundreds of pages and POL will provide a
summary as soon as the judgment has been formally handed down, which it has
committed to pass on immediately. Given the complexity of the case and high degree
of uncertainty about the judgment, we have also advised ministers to request a
verbal briefing after the judgment has been made.
8. The Common Issues trial focused on the contractual relationship between Post
Office and its agents and is only the first in an ongoing legal process that is
scheduled to encompass four trials, stretching to at least March 2020. The second
trial centred on the integrity of the Horizon IT system is due to start on 11 March. We
expect there to be media and parliamentary interest and UKGI and BEIS continue
to work closely with POL on communications. Separate advice on the litigation was
sent to ministers on 1 March.
9. You requested to see the questions raised by Kelly Tolhurst when she met with
officials on 26 February, and the answers provided. This is attached at annex B.
POL leadership, appointments and pay
10. Departure of Paula Vennells as CEO. Paula’s departure from Post Office has been
announced, as has her appointment as non-executive Chair at the Imperial College
Healthcare Trust, and as a non-executive Director at the Cabinet Office. Ministers
approved her exit terms, which we believed were appropriate and fair, but which
required a deviation from strict contractual entitlement. In the short term, a family
illness means that Paula will be stepping back from day-to-day management of the
Post Office as soon as an interim CEO has been appointed.
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11. Interim CEO and CFO retention. POL want to appoint the current CFO Al Cameron
as interim CEO, pending the recruitment of a permanent replacement. His
appointment requires ministerial approval, and is currently being considered by the
Secretary of State. Ministerial approval has been delayed and Tim is likely to raise
with you the problems it is causing the business.
12.POL have proposed that Al be eligible for the same base salary as Paula currently
receives, but not her bonus package. Al would also be eligible for a retention bonus
of £50,000 in the event that he was not appointed on a permanent basis, and on the
condition that he remain in post for six months after the new CEO starts. UKGI
believe that this is appropriate given Al's pivotal role in the company and the clear
risk that he would subsequently look to leave without adequate handover. Al is much
more than a CFO currently as he has operational responsibilities for part of the
business and is also the main source of commercial judgement on all major
commercial and strategic decisions. There has been some pushback on the
retention award from the SCS review panel, even prior to this going to ministers.
POL has put a retention scheme in place for the other senior executives just below
Board level.
13.POL deciding how to allocate Al's current CFO and COO responsibilities while he
serves as interim CEO. They are considering whether to allow Al to retain his
Finance Director responsibilities, with additional and suitably qualified support, or
whether to hire an interim CFO, who may or may not sit on the POL Board. You may
wish to press Tim on this decision. POL will inform us of this in the next few days
and ministerial advice will follow.
14.Senior pay. POL’s Articles of Association require shareholder approval for any
changes in the remuneration of directors appointed by the shareholder, including the
CEO and CFO. Pay for POL’s executive directors also requires approval from the
CST as it exceeds the relevant threshold. For 2018-19, POL’s Remuneration
Committee (RemCo) proposed an increase in base pay for the CEO and CFO of
2.6%, in line with that awarded to employees in the wider business. This followed an
increase of 2% the previous year, which was the first time that the CEO’s pay had
increased since her appointment in 2012. By the time the process reached the CST,
the leadership transition was underway, and she rejected the award on the basis
that it was unnecessary for retention.
15. Recruitment of a permanent CEO. The recruitment process has begun and we are
working with POL and their headhunters, Russell Reynolds, to develop an
appropriate reward package for the new CEO. The current CEO package is
significantly below lower quartile in the relevant benchmarks and there is severe pay
compression in POL’s executive team largely due to the near-freeze of the CEO's
base pay since 2012. Furthermore, HMT have indicated that POL should no longer
offer cash in lieu of pension, which is currently 25% of salary for the senior
executives. As a result, we expect POL to propose an increase in the base pay from
£255k to around £400k. We have emphasised to POL the need for any such
proposal to be strongly evidenced, and in addition, the importance of achieving a
diverse range of candidates.
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16. NED appointment. In December 2018, ministers approved the reappointment of two
POL NEDs, Ken McCall (Senior Independent Director and chair of Remco) and Carla
Stent (chair of the Audit and Risk Committee). POL will need to recruit a new NED
to replace Tim Franklin, who will come to the end of his second term in September
2019.
POL’s Financial performance and the Banking Framework
17. Financial performance. POL continues to improve its financial performance, with
trading profit forecast to reach £60m in 2018/19, up from £35m in 2017/18. This has
primarily been achieved by reducing costs through an extensive (and publicly
funded) modernisation programme and particularly by replacing more costly crown
branches with franchises run by independent postmasters.
18.While revenues have been largely flat, these should rise sharply in future once the
updated Banking Framework is in place from January 2020. POL’s proposals would
lead to around a doubling in Banking Framework income, based on the current
volume of transactions. Pricing was historically under-priced and increases are
required to ensure the long-term sustainability of banking services across the whole
post office network, and to ensure a fair reward to postmasters. The banks are
required to respond by the end of March and current indications are that they are
likely to agree to the proposals, subject to a few minor amendments.
19.POL is in the process of setting its budget for 2019/20 and we are discussing this
with the company. In addition to the additional revenue from the Banking Framework
which comes in to the last quarter, the company should also be seeing more benefits
from the franchising programme and the IT investments. POL management is
currently targeting EBITDAS of around £77m but UKGI thinks this is probably
conservative and needs to be increased.
20. Dividend policy. As a result, UKGI thinks a trading profit in the range of £80-100m
could be realistic in 2019/20, rising further in subsequent years. Rising profits offer
the opportunity to eliminate POL’s subsidy and the need to consider how best to
share the gains between postmasters, employees, new investment and the
shareholder. We are exploring the introduction of a dividend policy so that taxpayers
can also share in higher profits. If agreed between the parties, this policy would be
included in the Framework Agreement that is being discussed with POL at the
moment and which would be finalised as part of the corporate restructuring (see
below). The dividend policy would apply when the current funding period finishes in
March 2021
21. Investment funding. HMG allocated POL £210m of investment funding for the period
2018-2021, of which they have so far drawn down £142m. While some projects have
changed in scope and cost, the overall portfolio is on track to meet its budget. The
DMB programme has been accelerated as it provides additional benefits, while Mails
projects are on hold pending the outcome of negotiations with Royal Mail. UKGI has
worked closely with POL to improve both its controls and reporting around its
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transformation spend, providing extra comfort over its expenditure. You also wrote
to POL in January to reiterate that public funding should not be used to cover the
costs of the ongoing litigation.
Major operational and strategic issues for the business
22. Partnership with Bank of Ireland. POL are close to finalising a renegotiation of their
partnership with Bank of Ireland to provide financial services, including a market-
leading joint venture on travel money. UKGI have worked closely with POL
throughout the negotiations. The final result is likely to be somewhat reduced
revenues for POL. The key benefit for POL is that the exclusivity and termination
provisions are expected to be significantly improved and, as a result, should open
up opportunities to offer a wider range of financial services in partnership with other
providers both in the medium and long term.
23.Royal Mail. POL has an exclusive arrangement with Royal Mail Group (RMG)
running until 2022, which we believe is critical for the future of both organisations,
with mails continuing to account for roughly one-half of POL revenue. Negotiations
have stalled while RMG has been reorganising and refreshing its leadership team
and we expect them to pick up again later in the year.
24.Telecoms. This is a profitable business for POL but POL operates with a limited
offering in a highly competitive market. POL has been doing strategic work on the
telecoms business and is evaluating all options for the business including capturing
more value from the relationships it has with Fujitsu and TalkTalk as well as selling
the business.
25.IT migration. Post Office have successfully completed a migration of back office IT
systems. This has reduced both risk and operating costs. While POL has made
considerable progress in updating its IT systems and architecture, there is still more
to be done.
26. Corporate restructuring. POL proposes to alter its corporate structure, to create a
new holding company (HoldCo) and transfer ownership of its Financial Services
business, Post Office Insurance and Payzone from POL to HoldCo. This would mean
that the group would be compliant under FCA rules once its strategic initiatives in
these areas are completed. We are working closely with POL to ensure that the
Secretary of State will retain the same rights over the group as currently apply to
POL.
27. Retail Strategy. Post Office are working on a new Retail Strategy. It is likely that will
include the introduction of a new retail format that offers only a limited service
focused on parcel drop off and collection. This would be in addition to the existing
network of branches that offer the full range of services. The strategy also includes
greater simplification and automation of Post Office branches. This is a major
opportunity for POL to become more efficient and make itself a more attractive
proposition to retailers. In the Chair's Letter you asked POL report on this strategy
which could also have positive implications for agent profitability, another issue
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which has attracted considerable attention in parliament and the media. POL also
needs to take further strategic steps with its ATM fleet and its Supply Chain (cash
logistics) activities, both of which are closely linked to the Retail business and
relationships with the banks, and Digital Identity which is potentially an exciting
source of future growth.
28.Postmaster remuneration. Postmaster remuneration (or ‘Agent pay’) is becoming a
sensitive and topical issue, attracting increasing interest from MPs. Prior to the
Network Transformation (NT) programme, remuneration was a combination of fixed
and variable payments, depending upon the contract type for the particular branch.
Following NT, remuneration is purely based on transaction volumes for all branches
except a small number of community status and traditional branches. The
introduction of automation and simplification also created opportunities for
postmasters to reduce their own costs accordingly and use time savings to focus on
other revenue generating aspects of their business. Nonetheless, POL recognise
some of the changes created difficulties for postmasters and is wholeheartedly
committed to work with the NFSP to ensure postmasters are both rewarded fairly
and supported to run their business successfully. The Post Office increased
remuneration for banking transactions twice in 2018 and has begun a programme to
significantly increase the level of support offered to branches.
29. Franchising of Directly Managed Branches (DMBs or ‘Crowns’). There has been
substantial parliamentary interest following the Post Office’s announcement on 11
October 2018 regarding the franchising of 74 DMBs to WHSmith. Several MPs —
mainly Labour, supported by the Communications Workers Union (CWU) — voiced
their concerns regarding POL’s franchising business model, the availability of
services and access arrangements to the proposed new locations, POL’s
consultation, impact on staff and the partnership with and viability of WHSmith as a
business partner. More detail is set out in Annex C.
30.Post Office Card Account (POca). DWP has a contract in place with POL to
provide POca payments. POca is a very simple account, intended as a stepping
stone to mainstream banking, through which only pensions and benefits can be paid.
The current POca contract (2015) will not be renewed in November 2021. POca will
instead be replaced by a new, smaller-scale, replacement exception payments
provision for which DWP is finalising a business case. Since September 2015 DWP
have been moving POca users away from POca to a standard account of their
choice. By virtue of the Banking Framework Agreement, 99% of banks’ personal
customers can access their account at a local Post Office, meaning that pensioners
and claimants can continue to access a range of financial services through their Post
Office. BEIS is working closely with DWP and POL on conversion communication
and interventions. We also maintain regular contact with DWP to monitor and
mitigate risks arising from the migration, mainly the treatment of ring-fenced
customer.
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Department for
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UK Government & Industrial Strategy
Annex A: Chair’s Letter sent to Tim Parker (POL Chair) on 4 February 2019
Dear Tim,
STRATEGIC PRIORITIES FOR 2019/20
Congratulations on your re-appointment as Chair of the Post Office. Iam grateful for your work
to date in leading the Post Office, and I am pleased that we can continue to rely on your service
and expertise until September 2022.
The Government recognises the considerable progress that Post Office has made over recent
years, delivering two successive years of profit while continuing to maintain a network of more
than 11,500 post office branches and meeting Government’s national access criteria.
The Post Office remains vital to communities across the country and I recognise the greater role
it now has in financial inclusion, providing access to cash and basic banking services. It is
important that the Post Office builds on its recent progress to ensure it is successful and
sustainable for the long term.
Following your reappointment as Chair to the Post Office, I want to clarify Government’s
expectations for the Post Office for the forthcoming year:
1. New CEO Appointment: The Government is grateful for Paula’s dedicated service to
the Post Office, in particular as CEO since the split from Royal Mail. Once her move has
been confirmed, one of your immediate priorities will be the appointment of a new CEO
and ensuring a smooth transition. This is an important appointment and will require
shareholder engagement throughout the process.
2. Promoting Opportunity and Diversity: As you are aware, there is a deliberate and
sustained commitment by Ministers to promote diversity on appointments to public
bodies. We are absolutely committed to improving diversity on our respective boards,
and recognise POL’s progress in this area. Diversity is essential to make sure we have
the right mix of skills, abilities and backgrounds represented. We will need to continue
to work closely to promote a strong and diverse field of applicants on future appointments
and improve the overall diversity of the Post Office board and across the organisation.
To that end, I look to you to ensure that Post Office champions equality, diversity and
inclusion.
Overall, our perception is that the management changes and appointments that have been
made in recent years have led to an improvement in the quality of the management team
and have also improved the diversity of the senior management group. Given the
forthcoming changes to the senior management team, I am conscious that a new
appointment will change the mix of skills in the team and the appointment itself may lead
to consequential changes. I believe this would be an opportune time to consider
succession planning, both ahead of, and subsequent to a new chief executive being
appointed. It is of continued importance to ensure a mix of skills and experience to equip
the business to meet the challenges it faces now and in the future.
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3. Board Development: We expect that POL fully complies with relevant aspects of the
Governance Code. We welcome the current board review, and, in line with our policy in
this area, expect that this will be an annual exercise, with independent input at least once
every three years. We also expect director appraisals to be conducted on an annual basis
and that we can input into Chair and CEO appraisals. Finally, POL will need to comply
with the Corporate Governance Code’s requirement for workforce engagement and we
look forward to hearing about how you propose to do so.
4. Investment Spend Controls: We are very focused on the need for government funding
to be used prudently and efficiently in accordance with the objectives of the three-year
strategic plan, whilst recognising the need for some flexibility for a commercial business
engaged in investment projects. 1 wrote to Paula Vennells recently to emphasise this
point. Appropriate monitoring and reporting must be in place and I understand that the
format of reporting is being finalised with UKGI officials.
5. Company Restructuring: We are supportive in principle of the Company’s proposed
restructuring and it is important that it also meets Government’s requirements, including
the completion of the framework document and updated articles as well as a structure that
facilitates future dividend payments. I know that UKGI and BEIS officials are already
working with the Post Office team to ensure our requirements are clear.
6. Company Strategy and funding beyond 2021. 1 am conscious that POL is facing a
number of significant strategic challenges, both in relation to the changing conditions in
the retail sector and the substantial changes to some of the Company’s key business
relationships. The company has significant positive opportunities as well: the continued
restructuring of the network, improved IT and greater use of automation, the potential to
expand the network following the Payzone acquisition and to co-operate more closely
with the banks in the supply chain and ATMs. I believe that together these offer POL a
major opportunity to improve its offer to customers and the efficiency of the business.
We also have an objective that the Company should be financially self-supporting by the
time the current funding period ends. To enable us to consider these issues and the policy
options and other implications that could follow, I would like you to carry out the
necessary strategic work, in conjunction with UKGI officials, for presentation to me and
senior colleagues in BEIS.
7. Litigation: The ongoing litigation trials may have important financial, operational and
reputational consequences for Post Office. As the Minister and I emphasised at the
meeting we held with Paula and her team at the House of Commons in October,
Government needs to be kept fully appraised of developments, ahead of significant
decisions being taken.
8. Agent Pay: I know that you are looking at revisions to Agent Pay, in part as a
consequence of the renegotiation of the Banking Framework. The structure of
remuneration should ensure that being a postmaster is an attractive proposition, thereby
safeguarding the sustainability of the network. We ask the Company to keep us informed
as that work progresses.
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9. DMB Franchising Programme: Government have been supportive of the franchising
programme and the contribution it has made to the sustainability of the Post Office.
However, it is clear from feedback from MPs and other stakeholders that closures are
highly sensitive and often negatively received by the public. We want to work with you
to develop a more effective communications and engagement strategy to better promote
the benefits to consumers, taxpayers and the Post Office network. We would also
welcome closer collaboration on the timing of future announcements.
10. Post Office Card Account (‘POCA’): We would like to ensure that there is a robust
plan developed in partnership with DWP to manage the transition from POCA, including
the resolution of legacy issues.
T would welcome an opportunity to meet with you and POL management to discuss the contents
of this letter. 1 also propose that you meet with UKGI and BEIS at six-monthly intervals for a
formal shareholder meeting, which I hope we would both find useful.
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Annex B: Questions from Kelly Tolhurst, 26 February
Responses as provided by Tom Cooper, 26 February
Questions raised in relation to the court case
Question: How can we gain access to information about the judgement before it is made
{in the same way that Post Office board members can)? The Minister would like to
ensure this is done in time for the Horizon litigation case.
Response: Access to the ruling before it's made public is only possible with the approval
of the judge handling the case. It's too late to get that now given the ruling is coming
shortly. Seeking permission from the judge for this hearing was considered but we were
advised by the legal teams at POL and in UKGI that it isn’t straightforward, would be
unusual and may not be granted. We agreed to revisit this in relation to the upcoming
hearing and can provide the Minister with legal advice on the merits. What has been
agreed with Post Office is that a briefing on the decision will be available as soon as the
decision has been made public and this briefing would be available to BEIS. In the
meantime we will provide a briefing on the issues at stake in the hearing, possible
outcomes and where there might be potential for appeal if the outcome is negative.
The minister also requested:
e Hypothetical UQ rebuttals and answers. Provided in sub of Friday 1 March. The
minister also requested to see a copy of the Post Office’s risk table. Advice from
our legal team was that this was not appropriate given the detailed nature of the
document.
e A written brief on the upcoming ‘Horizon trial’. We will provide a written briefing
as requested and would be happy to arrange an additional verbal briefing if
desired. The Minister will recall that she had a verbal briefing for the previous trial
in addition to a written briefing. This was because much of the information relating
to the case is legally privileged. In addition the facts in this hearing relate to the
operation of the Horizon system and there is a large amount of quite technical
information.
Questions on other topics
Question: Is it possible to put a 6-month review clause into approval of interim CEO of
Post Office? Can we write into the contract that the position is for a fixed period in order
that POL have a date to work towards for the permanent position and it doesn’t slip on
indefinitely? How much oversight does the law allow us of key appointments at the Post
Office?
Response: I believe it should be possible to have a fixed period for the interim
appointment but I don’t think it’s advisable. The Chairman is very motivated to make an
appointment of a strong candidate and the process is already under way. Until the new
CEO is in post, there needs to be an acting CEO to be in charge of the company and it
would not be wise to remove the acting CEO during that period unless the acting CEO
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is not performing. Experience with appointments is that delays are most likely to stem
from the approvals process for appointments and pay within HMG rather than on the
company side. If there is delay on the company side it will most likely be because it isn't
possible to attract quality candidates (unlikely because Post Office has many attractions
for a CEO candidate) or the company isn’t able to find a suitably qualified candidate at
the package being offered (this is more likely - as we mentioned, we are already on
notice from HMT that it will not be easy to get approval even for a package benchmarked
to the lower quartile). My suggestion here is that we keep the Minister closely informed
of how the recruitment is progressing rather than seeking to limit the acting CEO’s period
of appointment.
On oversight, the appointment of the Company’s CEO, CFO and NEDs all require SoS
approval
Question: What are the powers of the Secretary of State for BEIS vis-a-vis the Post
Office:
e How is the Board appointed? What oversight does the Perm Sec have in this
process?
Response: As mentioned above the CEO, CFO and NEDs require SoS approval. In
addition to the CEO, one of the NEDs is completing his second term in September and
these appointments will be made in line with HMG guidelines including a selection panel
led by Tim Parker, the Chairman, as well as opportunities for Ministers to put forward
potential candidates. The process is as set out in the attached sub which has already
been approved
e Appointments of senior staff in POL
Response: All other appointments in the company are made by the company
itself. There is a Nominations Committee of the Board that leads on this and takes the
decisions on such appointments
The Minister requested more detail and timeframes for the recruitment process.
Response: This was provided as an annex to the submission on the recruitment
process.
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Annex C: Detail on POL’s DMB franchising programme
1. POL Franchising business model: the management of the network and decisions
on franchising are operational responsibilities for the Post Office. Operational
decisions are made by the CEO, Paula Vennells, and her executive team,
scrutinised by the Board. POL’s proposal to franchise Crown branches are part of
its plans to ensure a sustainable network in the face of unprecedented challenges
on the High Street and in consumer behaviour. Franchising is not a closure
programme and has been instrumental in removing losses to the Crown network
from £46 million in 2012 to break even today. The Retail Strategy will continue
POL’s programme of replacing Crowns with franchised branches. While we remain
supportive of the programme, we have asked POL to develop a more effective
engagement strategy to counter the widespread negative publicity and
misunderstandings that franchising is a closure programme, leading to
redundancies and the deterioration of service for consumers.
2. Availability of services and access to franchised branches. Critics of the programme
of Crown branch franchising often point to reports by Consumer Focus (2012)
claiming that franchising to WHSmith results in inferior customer service and poor
disabled access. This is not the case; a more recent report by Citizens Advice (June
2017) shows that franchised branches perform in line with, or better, than Crown
branches. In addition, WHSmith is required to adhere to high customer service
standards and existing legislation on accessibility.
3. POL consultation. While the decision to proceed with franchising of a Directly
Managed Branch is a commercial one for the business to take, the Post Office seek
feedback and suggestions about specific aspects of the franchising such as access
arrangements, service offered and internal layout, Local public consultations last for
a period of 6 weeks and the Post Office contacts local elected representatives,
Consumer Advocacy bodies and opinion formers to make them aware of the
process. POL does all it can to take into account customer feedback in making their
decision.
4. Impact on staff. Franchising is not a redundancy programme. Post Office staff have
the right to transfer their employment to the franchise partner in line with TUPE
legislation or leave with voluntary settlement. POL consult extensively with all staff
affected by franchising to explain in details what their options are. Some MPs have
been tweeting about the fact that WHSmith were advertising Post Office jobs prior
the end of the consultation period. This is normal practice, and it is not the case this
pre-empts any final decision about moving the branch. Once a branch goes into
consultation, both POL and the potential new operator begin all the detailed
planning for the move. This include getting planning permission and starting the
recruitment process — both of which can take up to several months. Planning
permission sought for any branch would only be actioned by the potential new
operator if the proposal went ahead, and any recruitment is conditional upon the
proposal being approved.
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Partnership with WHSmith. With the latest announcement, the total number of Post
Offices operated by WHSmith in their stores is planned to rise overall to over
200. WHSmith and POL have been cooperating since 2006 and POL is confident
this agreement will help protect Post Office services, delivering extended opening
hours, including Sunday opening, in refurbished store layouts. While franchising has
been the principal driver of profit improvement at POL, the programme does require
investment by the company — not just in closing the existing branch but also in
contributing to the setting up of the new one. The investment into new branches
works out at an average 50:50 between POL and WHSmith.
Viability of WHSmith as a business partner. MPs have been speculating regarding
what might happen to Post Offices franchised to WHSmith if the retailer was to go
bust. However, WHSmith as a business is profitable. Indeed, despite the well
documented challenges of the UK high street, WHSmith has delivered sustainable
profits for the past 13 years and the company’s latest set of financial result show
that the it saw its third highest profit delivered by its high street business over the
last 15 years. Moreover, WH Smith's Post Offices are performing well, and POL
have every confidence that the recent deal will help secure the sustainability of Post
Office services. Looking more widely at the Post Office estate since 2013, including
where it is partnering with others to provide Post Office services, the Post Office
network has been very stable, having changed in size by well under 1%.
Nonetheless, POL is not complacent and has regular reviews and contingency
plans in place with its partners to check performance levels and business issues.
Contingency plans include providing six months' notice of branch closure to allow
POL to identify alternative provision. These plans apply to all franchising partners.
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Business, Energy
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