Government fury at Post Office’s WHSmith franchise deal

Politicians have expressed anger and concerns over the stability of the Post Office network following its decision to turn 74 centrally managed crown branches into franchises run by WHSmiths in its nearby stores.

The Post Office receives £370m in network subsidy payments from the government as long as it maintains a network of 11,500 Post Offices. If the deal goes ahead, WHSmiths will have 242 out of 11,547 locations, meaning a collapse of the retailer would put the Post Office in breach of its funding terms.

WHSmith’s high street business has experienced 14 years of consecutive sales decline. In its latest financial results, the Post Office admits that falling below the store target would have “consequential financial impacts” for the publicly owned business.

The Post Office was called to attend an emergency closed meeting of the All-Party Parliamentary Group (APPG) on Post Offices to explain the decision. Sources at the meeting told RN that the Post Office’s sales and trade marketing director, Roger Gale, was unable to outline the organisation’s contingency plan in the event of WHSmiths collapsing. 

MP and APPG chair Gill Furniss told RN: “I was left disappointed by the answers from Post Office officials. Despite the Post Office’s protestation that there will be a consultation on the closures, it was revealed that in fact the decision to close the Crown Post Office is final and not up for consultation.”

At least four MPs, Graham Stuart, Debbie Abrahams, Jim McMahon and Angela Rayner have challenged Post Office minister Kelly Tolhurst to further examine the Post Office’s decision. Abrahams described WHSmiths as “ a struggling private sector retailer.”

Several of the 13 MPs present at the APPG also alleged that cuts to sub-postmaster pay were also destabilising the post office network. One MP’s aide told RN pay levels were “a leading cause of branch closures in our constituency.”

Asked to respond to MP concerns, a WHSmith spokesperson, said: “WHSmith is a highly profitable and growing business with over 225 years of heritage. Despite the challenges facing the UK high street, more generally, WHSmith is a strong and proven business partner of Post Office Limited. With over 600 High Street stores and 168 Post Offices already located within our stores, we are committed to both the high street and to the communities in which we operate.

We have been successfully operating Post Offices in our High Street Stores since 2006 and have received positive feedback from our customers. Customers often comment on the longer opening hours, shorter queue times and the more modern environment. All of these Post Offices have opened following a full consultation with the public and key stakeholders.

Asked to comment on the criticisms, a Post Office spokesperson told RN: “We are not immune to the challenges facing retailers in local high streets, and we must adapt to changing customer needs by making our services more accessible to customers, for instance through longer opening hours. Our proposal to franchise a further 74 to WHSmith enables us to maintain branches in town and city centers in a way that’s financially sustainable, not just for today’s customers but tomorrow’s too. 98% of the Post Office network is run in this way, on an agency or franchise basis. It’s a model that works through delivering the benefits of shared overheads and footfall.”

Calum Greenhow, CEO of the National Federation of Sub Postmasters attended the meeting and told RN afterwards: “The franchise model is the most appropriate for post office branches and we welcome the announcement to move more Crown offices into independent operation. WHSmith is a valued member of the NFSP, and a profitable, growing, business with over 225 years of heritage. It has been successfully operating post offices since 2006.” 

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