Post Office chief delivers plan to share profits with postmasters

The government should explore plans to turn the Post Office into a profit-sharing business, allowing postmasters to participate in the future financial success of Britain’s largest retail network, its chief executive has said.

Sky News has learnt that Nick Read, who has run the Post Office since the autumn of 2019, told colleagues last week that he wants ministers to sanction what would effectively amount to its partial mutualisation once its finances are in appropriate shape.

The ambition, which was outlined by Mr Read in a speech to his senior leadership team on Friday, would potentially enable thousands of postmasters across the UK to receive a financial stake in the Post Office by the middle of the decade.

“As we look towards the next Comprehensive Spending Review, I intend to work with government on the various means by which we could deliver on a longer-term aspiration to facilitate profit-sharing between Post Office Limited and postmasters when circumstances permit,” Mr Read said in the speech, a copy of which has been seen by Sky News.

“As we become commercially sustainable and no longer reliant on government subsidy, looking for new ways to ensure postmasters share fairly in that success is the right thing to do.

“And I do think it is important, particularly in the context of building something afresh, to share in an aspiration, a common goal.

“For [the] Post Office to be in a position, say by 2025, to make this a credible option for postmasters, their customers and the government would, it seems to me, represent a genuine achievement.”

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nick read, post office ceo
Nick Read, chief executive of the Post Office

Mr Read’s aspiration remains at a conceptual stage, and there is no guarantee that ministers will agree to implement it.

Nevertheless, the fact that Mr Read – who has gained respect in Whitehall for his early efforts to modernise the scandal-hit organisation – was prepared to articulate it to senior managers suggests that it is unlikely to be dismissed out of hand.

In his wide-ranging speech, the Post Office chief also delivered the organisation’s most fulsome corporate mea culpa to date for the IT scandal that caused dozens of postmasters to be wrongly convicted of theft, fraud and false accounting.

The crisis had turned the Post Office into Britain’s “most untrustworthy brand”, the Court of Appeal was told last month as an appeal by more than 40 postmasters against their convictions got under way.

“Our organisation’s historic handling of this matter fell short,” Mr Read said. “I am in no doubt as to the human cost of this.”

He added that the affair had caused “very deep pain” but warned that the Post Office would be unable to shoulder the financial burden of a major compensation bill alone, calling for government support to fund it.

“If the Court finds that a large-scale miscarriage of justice took place, we can expect it to carry a large-scale cost.

“The Post Office simply does not have the financial resources to provide meaningful compensation,” he told colleagues.

“I am urging government to work with us to find a way of ensuring that the funding needed for such compensation, along with the means to get it to those to whom it may become owed, is arranged as quickly and efficiently as possible.

“Acting swiftly would also enable the Post Office to place even more focus on ensuring that there can be no recurrence of these deeply damaging events.”

In December 2019, the Post Office agreed to pay nearly £58m to settle a legal claim brought by 550 sub-postmasters.

At the time, the network, which has around 11,500 branches across Britain, apologised, with Mr Read’s predecessor, Paula Vennells, targeted by particularly fierce criticism over her handling of the crisis.

Mr Read added that the Horizon IT system at the centre of the scandal would be replaced “in favour of a modern, cloud-based system which postmasters will find more intuitive and easier to operate”.

A former chief executive of Nisa, the convenience store group, he has moved to address postmasters’ concerns about the Post Office’s corporate governance by agreeing to nominate two of them to the government-owned company’s board.

In his remarks last week, he lambasted his predecessors for adopting “a ‘parent and child’ relationship with its postmasters, rather than a partnership of equals”.

“There has been a pronounced imbalance of power in the relationship between us, creating a situation in which the company has felt that it has all the answers, and has expected postmasters to follow its lead unquestioningly.”

His speech came during a period of profound shifts in consumer behaviour which have been accelerated by the coronavirus pandemic.

Mr Read argued that preserving the future of the 460 year-old network would depend upon bold decisions being taken to ensure continued innovation.

Among the ways this would be achieved, he said, would be to complete its journey to being a fully franchised business, with a range of retail formats such as one combining parcels and bill payment services.

He added that the overall number of Post Offices would rise to 12,000 by 2025.

The Post Office is a separate company from Royal Mail Group, which was privatised in 2013 and floated on the London Stock Exchange.

Mr Read said that a deal reached between the two in December paved the way for his company to work with other major logistics and courier companies.

“The spectacular growth in online shopping we have witnessed since the start of the pandemic represents a very sizeable and achievable opportunity for our own growth at both corporate and branch level,” he added.

The Post Office’s financial performance had, nevertheless, been adversely affected by the pandemic, Mr Read said, with earnings for last year likely to be “less than half” of the £86m achieved in 2019-20.

Since taking the reins, Mr Read has sold the Post Office’s broadband business to Shell, raising close to £100m, and initiated a review of its insurance arm.

A Post Office spokesman confirmed that the contents of Mr Read’s speech were genuine but declined to comment further.