ALEX BRUMMER calls for the Security and Investment Act to be invoked to stop this terrible deal with Royal Mail

One of the first industrial tests facing the new Labour government will be what to do with the Royal Mail.

The owner of Britain’s postal system, International Distributions Services (IDS), is proposing to sell a vital part of the UK’s infrastructure to Czech billionaire Daniel Kretinsky and a controversial Slovak financial group, backed by foreign banks, for £3.6bn.

The Labour Party, in its manifesto, pledges to “examine the deal in depth” and give workers “a stronger voice”.

A large majority in a general election is no excuse for not keeping one’s word.

My conversations with former senior executives and unions illustrate precisely why selling a historic company and a major employer to foreign financiers with little understanding of the national interest is a terrible idea.

The price at which a weak board is selling is inappropriate. However, active investor Schroder, with a 6.23% stake, and asset manager UBS, with 6.3%, have so far remained silent. The timing is crazy.

This comes after a debilitating industrial dispute and no positive results have yet been achieved.

Regulator Ofcom, headed by former senior civil servant Melanie Dawes, was late to the party in hammering out a new deal for the universal service obligation (USO), which calls for delivery six days a week and down to the last mile.

Furthermore, loading a debt-laden balance sheet with more leverage in the short term makes no sense.

Instead of the muscular defense that boards are required to offer when under siege, IDS directors have been flaccid.

Chairman Keith Williams preferred to negotiate the terms of the sale, in the form of agreements that will be difficult to enforce, rather than at least fight for an even better price.

Sarah Hogg, 78, a senior non-executive, has a long and distinguished career that includes a stint as a City editor.

But in its role as a sounding board for dissident shareholders and other stakeholders, its voice has not been heard.

As for the rest of the non-executive directors, fascinated by their misguided notion of fiduciary duty, they have behaved like nodding dogs.

The main reason for Royal Mail’s vulnerability is its long-running dispute with the Communications Workers Union (CWU), which has championed workers’ rights.

However, agreements on wages, working conditions and reforms to delivery systems, designed to give the postal service a lifeline, have not had time to bear fruit. It is axiomatic that in the second year after a labour dispute is resolved, there is a recovery in revenues.

IDS’s offering document from last week confirms this, with a forecast of “return to adjusted operating profit” in 2024-25.

Existing investors, including workers and private shareholders, have borne the downside, and Kretinsky and his cronies will enjoy the upside.

Managing Royal Mail in a context of rapidly falling volumes was always going to be a challenge, not least because of the USO.

The CWU acknowledged this but felt that with more careful management in an age of online shopping, the packages could have made up for that shortfall.

On the continent, regulators recognised several years ago that their USOs needed to be modernised, allowing many services to keep jobs intact and their finances healthy.

Ofcom, the UK regulator, only took action a few months ago, by which time the demons were already lurking.

Governing is hard and Labour has a particular obligation to the workers, about whom it talks incessantly, and to the unions that help fund its operations. It cannot, like the Conservatives, absolve itself of its obligations in the name of the free market.

Royal Mail provides a vital public service and works closely with the NHS, HMRC, the Metropolitan Police and electoral offices during elections.

If ever there was a time for a new government to demonstrate that it will use the full might of its regulatory powers to inoculate UK businesses from foreign marauders, it is now.

Invoking the National Security and Investment Act and ending the disastrous IDS deal is a no-brainer.