European commission may seek break-up as price for government takeover of debt-ridden Royal Mail pension scheme
Royal Mail could be forced by Brussels to unload some of its most profitable divisions in exchange for a government rescue of its pension scheme.
According to weekend reports, the European commission is debating whether the British government's plan to take over Royal Mail's pension scheme, which has an �8.4bn deficit, constitutes state aid that would give the group an unfair advantage over rivals.
The commission could demand the sale of Royal Mail's most profitable operations in return for approving the plan, such as its European parcels division, General Logistics Systems. However, selling off Royal Mail's most valuable assets could damage the government's plans to sell the group.
A Royal Mail spokesman said: "It's far too early to speculate on any EU state aid outcome. The UK government has not yet made a state aid notification to the European commission. When a notification is made, we believe that a very strong and compelling argument will be put to the commission."
Lloyds Banking Group and Royal Bank of Scotland were forced to sell off operations by the commission after they were bailed out by taxpayers. However, experts point out that the postal industry is different because it is in long-term decline. The number of items handled by Royal Mail each day has fallen by 16m to 68m over the last five years.
The government announced plans last year to sell off 90% of Royal Mail to private companies, with the remaining 10% going in shares to postal workers. The Post Office arm will be retained and is expected to be converted into a mutual, similar to the John Lewis Partnership or the Co-operative Group.
Source: http://www.guardian.co.uk/uk/2011/jan/02/royal-mail-privatisation-european-commission-curbs
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