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‘Back door’

The owner of Royal Mail is expected to show a return to annual earnings on Monday in the firm’s first set of results since the completion of its £3.6 billion takeover by Czech billionaire Daniel Kretinsky.

International Distribution Services (IDS) will post figures for the 12 months to March 31 after a milestone year for the group, which saw Royal Mail taken into foreign ownership for the first time in its more than 500-year history.

The year has also seen regulator Ofcom rubber stamp reforms allowing Royal Mail to ditch second class letter deliveries on Saturdays and change the service to every other weekday, which the group can start rolling out from July 28.

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IDS said in January that it was on course to return to annual adjusted operating profit, before voluntary redundancy costs, in 2024-25, “despite the difficult market environment”.

Its third quarter update showed group revenues lifted 0.8% to £3.6 billion thanks in part to a parcel boost over Christmas.

Royal Mail parcel revenues rose 2.5% to £1.02 billion in the quarter as prices rose, while the division was also helped by a better performance internationally, where revenues jumped 6.6% to £227 million.

But the group warned in November that it was facing a £120 million hit from the incoming national insurance tax hike and that it could not rule out job cuts or price hikes to offset the blow.

It also saw an investigation launched in May after it only delivered just over three-quarters of first-class post on time last year, following hefty fines for missing targets in previous years.

Parent group IDS formally left the London Stock Exchange on June 2 after being taken over by Mr Kretinsky’s EP Group following clearance by the Government at the end of 2024 and approval by shareholders in April.

Royal Mail’s new owner also issued a £1 so-called golden share to the UK Government, as agreed under the deal.

Mr Kretinsky – appointed as the new chairman of Royal Mail – has pledged to stick to the Universal Service Obligation (USO) after the takeover.

Royal Mail also announced in recent days that it will be the first international postal operator to launch new services so people can continue sending goods to the United States as new customs requirements take effect from August 29.

Royal Mail customers now can use the company’s new postal delivery duties paid (PDDP) services, which follows a US executive order last month that goods valued at 800 dollars or less will no longer be exempt from import duties and taxes from August 29.

The Institute of Directors (IoD) has warned around 30% of its member firms that export to the US will be hit by the new rules, with smaller companies predominantly impacted.

The share prices of leading UK banks have tumbled following calls for the government to introduce a new tax on banking profits.

Traders and investors have reacted to the Institute for Public Policy Research (IPPR) saying a windfall tax could raise up to £8bn a year for the government.

The think tank said the policy would compensate taxpayers for losses on the Bank of England’s cash printing drive.

While the Treasury has not commented on any policy, concerns led to NatWest, Lloyds and Barclays being the biggest fallers on the main index of the London Stock Exchange early on Friday.

NatWest and Lloyds share prices were down by more than 4%, and Barclays had dropped by more than 3% in early trading.

Charlie Nunn, the chief executive of Lloyds bank, has previously spoken out against any potential tax rises for banks in the Budget.

He said efforts to boost the UK economy and foster a strong financial services sector “wouldn’t be consistent with tax rises”.

The Treasury has been contacted for comment.

The IPPR, a left-leaning think tank, said a levy on the profits of banks was needed as the Bank of England’s quantitative easing (QE) drive was costing taxpayers £22bn a year.

The Bank of England buys bonds – essentially long term IOUs – from the UK government and corporations to increase bond prices and reduce longer term interest rates.

The Bank is selling off some of these bonds, and the IPPR said it is now making huge losses from both selling the government bonds below their purchase value and through interest rate losses.

The IPPR described those interest rate losses as “a government subsidy to commercial banks”, and highlighted commercial bank profits compared to before the pandemic were up by $22bn.

The tax suggestion comes as Chancellor Rachel Reeves faces the difficult task of maintaining her fiscal rules while finding room for spending promises in the upcoming autumn Budget.

Carsten Jung, associate director for economic policy at IPPR and former Bank of England economist, said the Bank and Treasury had “bungled the implementation of quantitative easing”.

“Public money is flowing straight into commercial banks’ coffers because of a flawed policy design,” he said.

“While families struggle with rising costs, the government is effectively writing multi-billion-pound cheques to bank shareholders.”

Speaking on BBC’s Today programme, Mr Jung said the £22bn taxpayer loss was roughly equivalent to “the entire budget of the Home Office every year”.

“So we’re suggesting to fix this leak of taxpayer money, and the first step would be a targeted levy on commercial banks that claws back some of these losses,” he said.

A tax targeting the windfall profits linked to QE would still leave the banks with “substantially higher profits”, the IPPR report said, while saving the government up to £8bn a year over the term of parliament.

But financial services body UK Finance said that a further tax on banks would make Britain less internationally competitive.

“Banks based here already pay both a corporation tax surcharge and a bank levy,” the trade association said.

The association said a new tax on banking would also “run counter to the government’s aim of supporting the financial services sector”.

Russ Mould, AJ Bell investment director, said the UK stock market had soured following the suggestion, with investors wondering “if the era of bumper profits, dividends and buybacks is now under threat”.

“The timing of the tax debate, fuelled by a report from think-tank IPPR, is unfortunate given it coincides with a new poll from Lloyds suggesting a rise in business confidence, despite cost pressures,” he said.

The Chancellor has worked hard since Labour won power to woo the City. In her Mansion House speech in November last year, Reeves said that banking regulation after the 2008 financial crisis had “gone too far”.

But she faces difficult fiscal decisions in the run-up to her budget, after the government watered down its planned welfare savings and largely reversed winter fuel allowance cuts – decisions which narrowed her budget headroom.