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Royal Mail part-privatisation plans underway

Sale may help plug Royal Mail's £10bn pension deficit.

The UK government plans to privatise up to 49 per cent of Royal Mail as Business Secretary Vince Cable believes a completely state-owned postal services group cannot compete in a liberalised market.

The previous government's plan to part-privatise the group got halted last year in the absence of adequate political support and the lack of suitable buyers from the private sector.

The new proposal may permit half the stake that remains after the sell-off to be owned by employees in a trust, with the Government owning the rest. The sale may also help the Government take up the Royal Mail's pension liabilities, estimated to be about £10bn.

While the Conservatives have favoured a straight sell-off, the Lib Dems reason that an employee's trust can ease the way for the privatisation process. The Communication Workers' Union will, however, oppose the move on the grounds that Royal Mail provides an essential public service and must be state-owned.

Royal Mail reported operating profits of £404m for the last financial year, up 26 per cent over the previous year. However, it said the deficit in its pension scheme could be "significantly higher" than expected.