Public sector restructuring and the re‐regulation of industrial relations: the three‐decade project of privatisation, liberalisation and marketisation in Royal Mail

• Published date: 01 July 2017
• Date: 01 July 2017
• Author: Stephen Mustchin
• DOI: http://doi.org/10.1111/irj.12181

Public sector restructuring and the

re-regulation of industrial relations: the

three-decade project of privatisation,

liberalisation and marketisation in Royal

Mail

Stephen Mustchin

ABSTRACT

The British postal service, Royal Mail, was privatised in 2013, following failed

attempts at divestiture in 1994 and 2009. This article analyses processes of

marketisation, liberalisation and privatisation, highlighting how strong workplace-

centred union presence allowed for considerable influence and bargaining gains

within such highly sensitive political projects of restructuring.

1 INTRODUCTION

Following five hundred years in public ownership and attempted privatisations in

1994 and 2009, Royal Mail, the British postal service, was privatised by the

Conservative–Liberal Democrat coalition in 2013 (Parker, 2014). Nationalisation

and privatisation remain contested forms of ownership, as seen with the Labour

Party’s 2017 election commitment to bring Royal Mail back into public ownership;

therefore, more research on the characteristics and nature of industrial relations in

organisations under different forms of ownership is required. Studies of the postal

service have contributed significantly to the historical development of public sector-

focused industrial relation literature (e.g. Batstone et al., 1984). From the late

1980s, industrial relations in Royal Mail became increasingly conflictual (Darlington,

1993; Gall, 2003), wide-ranging human resource management interventions were

introduced (Beale, 2003; Martinez Lucio et al., 1997; 2000a; 2000b), followed by

liberalisation and active state promotion of competition since 2006 (Beale and

Mustchin, 2014; Beirne, 2013), and ultimately, privatisation through share

divestment. These developments have impacted markedly on work and the labour

process, but union influence, particularly at the level of the workplace, has remained

comparatively strong in Royal Mail. This compares starkly with the highly precari-

ous, low paid and weakly regulated employment typically generated by competitors,

which increases market-driven and regulatory pressure on the established model of

employment and industrial relations in the former state corporation.

❒Stephen Mustchin, Alliance Manchester Business School, University of Manchester, Manchester, UK.

Correspondence should be addressed to Stephen Mustchin, Alliance Manchester Business School,

University of Manchester, Manchester, UK; email: stephen.mustchin@manchester.ac.uk

Industrial Relations Journal 48:4, 294–309

ISSN 0019-8692

© 2017 Brian Towers (BRITOW) and John Wiley & Sons Ltd

This article draws on qualitative research conducted between 2009 and 2016 to ex-

plore how marketisation, liberalisation and privatisation have impacted on industrial

relations and the labour process in Royal Mail. This raises wider questions about the

impact of market competition, state-regulated market creation and the prioritisation

of shareholder interests on industrial relations and the labour process, demonstrating

tensions between strategies of labour cost minimisation competing with those focused

on quality and maintaining ‘decent’employment conditions (Schulten and Brandt,

2014: 137). The wider question of how sustainable the latter form of employment

relationship is given market and shareholder pressures on employers (Thompson,

2013) is also addressed. The case highlights new forms of conflict building on long-

standing employeeresistance to managementinterventions and restructuring.Particular

political contingencies (Fernerand Colling, 1991) associated withthe privatisation ‘pro-

ject’allowed for significant capacity for labour to mediate the impact of these changes.

2 PRIVATISATION, LIBERALISATION, MARKETISATION AND

INDUSTRIAL RELATIONS

Advocacy of privatisation is typically premised on beliefs that private owners convey

greater efficiency incentives to managers and workers than ministries, have increased

access to capital investment and capacity to innovate and that labour costs are exces-

sive in public corporations (Florio, 2006:179). Three main forms of privatisation

include the following: formal privatisations, or changes to the legal form of an

organisation without the sale of shares, freeing companies from administrative or

budgetary constraints; substantial privatisations, or the complete or partial sale of

state-owned enterprises; and functional privatisations, concerning contracting out

and the execution of formerly public responsibilities by private companies

(Zohlnhöfer et al., 2008: 97). Related but distinct processes include liberalisation,

where public monopolies are abolished with the state encouraging competing pro-

viders, and marketisation, where market elements are introduced as part of internal

reorganisation (as seen within New Public Management) but without explicit facilita-

tion of competition from alternative providers (Hermann and Verhoest, 2014: 7–9).

Globally, privatisation proceeds peaked in the 1990s in the context of mass

restructuring in the former Soviet Union and China, pressures on national govern-

ments in the EU deriving from the Maastricht criteria and the promotion of

privatisation in developing countries by transnational institutions such as the World

Bank and International Monetary Fund (e.g. Kikeri and Kolo, 2005). Britain was

an enthusiastic early adopter of mass privatisation; numbers employed in industries

privatised after 1979 (chiefly utilities, telecommunications, energy, manufacturing

and transport) fell by 800,000 or 60 per cent in the period up to 1996; 638,000 of these

jobs were lost between 1979 and privatisation itself (Florio, 2006:184–186). This era

of substantial privatisations was followed by an emphasis on functional privatisation

during the 1997–2010 New Labour governments; public–private partnerships in

health, local government and infrastructure development demonstrated notable

continuity with their Conservative predecessors (e.g. Shaoul, 2011). Since 2010,

Conservative-led governments have accelerated and deepened these processes of

privatisation and marketisation; in Jessop’s periodisation of the post-1979 period,

their approach was characterised as ‘radical Thatcherism redux’(Jessop, 2015: 23).

Further privatisations and public sector job cuts were implemented under the auspices

of balancing the budget deficit and premised on an ideological conviction that public

295Privatisation and liberalisation in Royal Mail

© 2017 Brian Towers (BRITOW) and John Wiley & Sons Ltd