Home MOREBUSINESS & ECONOMY Belgium’s bpost to receive state aid, as the end appears nigh for UK’s 506 year old Royal Mail

Belgium’s bpost to receive state aid, as the end appears nigh for UK’s 506 year old Royal Mail

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The European Commission has approved, under EU State aid rules, Belgium’s plans to compensate bpost for providing postal services of general economic interest between 2022 and 2026.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Access to postal services continues to be important for European citizens and businesses. Today’s decision confirms that the Belgian plans to compensate bpost for the provision of universal postal services are in line with EU State aid rules. This enables bpost to continue delivering postal services across Belgium at affordable prices for consumers, without unduly distorting competition.”

In December 2021, Belgium notified the Commission of its plan to compensate bpost with €634 million for delivering certain public postal services over the period 2022-2026. Such services for example include maintaining a post office network throughout Belgium, delivering pension payments, providing ‘cash at counter’ services, as well as delivering printed material related to elections in Belgium.

The Commission’s assessment

The Commission has assessed the Belgian measure under EU State aid rules, and in particular under Article 106(2) of the Treaty on the Functioning of the European Union, as well as the rules on public service compensation, under the Service of General Economic Interest (‘SGEI’) Framework.

The Commission has examined whether the amount of compensation to be paid to bpost may exceed what is necessary to cover the net cost of discharging the public service obligation. The Commission concluded that:

  • The compensation is based on a robust and conservative methodology, which ensures that it will not exceed the cost of the public service mission entrusted to bpost.
  • The compensation mechanism includes incentives for bpost to increase the efficiency and quality of its public services.
  • Belgium organised a public consultation which confirmed the essential social and economic role of the public services entrusted to bpost.

The end of Britain’s Royal Mail?

Meanwhile, the UK’S Royal Mail said it would rename its holding company International Distributions Services Plc and could separate its UK business, where its workforce is set to strike over pay, if its performance doesn’t improve – something that is not widely anticipated.

According to Reuters, Royal Mail’s UK business lost £92 million in the first quarter on revenue that fell 11.5% as inflation-hit consumers cut back on online shopping and amid soaring costs. Parcel volumes were down 15%.

“The severity of profit decline in the UK is surprisingly sharp, and we think current year group EBIT consensus could halve,” J.P Morgan analysts said in a note.

Overall, revenue in the April-June quarter was down 5.1% and shares in the group slid 3% in early trading.

The 506-year-old post and parcel delivery firm said on Wednesday it would consider splitting its UK business and overseas parcels business GLS into two separate firms if no “significant operational change” is achieved.

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