22 October 2009 | Allie Anderson
Royal Mail was dealt another blow this week after it lost out on an £8 million contract with the Scottish government.
Both private firm TNT and Royal Mail submitted bids for contracts to deliver first and second-class mail after the tendering process began in March. Procurement Scotland, which buys goods and services on behalf of all the country's public sector organisations, awarded Royal Mail the £17 million first-class deal but TNT clinched the second-class contract.
Previously, public sector organisations in Scotland had their own arrangements for the delivery of postal services. Some used Royal Mail, others TNT or another supplier. The new agreement brings all 89 bodies together under the same contract for the first time.
Alistair Carmichael, Scotland spokesman for the Liberal Democrats, described Royal Mail's loss of business as "alarming", but the government defended the deal, arguing it would save £2.95 million every year.
During a debate with postal services minister Pat McFadden in parliament this week, Carmichael said: "Even without the impact of strike action we have the very alarming news that the Procurement Scotland public sector contract which deals with the mail to NHS Scotland, colleges and most councils in Scotland is going to be given to a private sector operator.
"What can [McFadden] do to ensure that the haemorrhaging of business that we've seen from private business does not now spread to the public sector?"
In response, McFadden said: "Competition exists in the postal service, and it will not go away."
Royal Mail said it is fighting hard to win business in a market where rivalry is becoming "increasingly fierce". "That is why we urgently need to modernise our operations so we can compete and win business such as this," said a spokesman.
Postal workers today began two 24-hour national strikes after talks between Royal Mail and the Communication Workers Union broke down.
Business secretary Lord Mandelson said: "National strike action is not in the best interests of the company, the workforce or the hard-pressed consumers and businesses that depend on Royal Mail. I deeply regret this decision."