Here’s what you need to know about Sweden’s crisis-hit postal service

Swedish postal service Postnord announced on Tuesday that its CEO would leave his role with immediate effect, the latest news from the crisis-hit service. Here's all you need to know about the challenges facing Postnord and the changes it's already introduced, from delivery times to postage costs.

Here's what you need to know about Sweden's crisis-hit postal service
The volume of letters sent to and from Sweden has fallen, while parcel volume has increased. File photo: Emil Langvad/TT

CEO to leave with 14 million kronor

CEO Håkan Ericsson will immediately leave his role with a golden parachute of over 14 million kronor ($1.5 million), the Postnord board announced on Monday.

“As a consequence of acceleration market changes, the pace of Postnord's adaptation efforts needs to increase further,” chairperson Christian Jansson said. Ericsson and the board both agreed that new leadership was necessary, Jansson said, and recruitment of a new CEO would begin immediately.

Head of finance to quit

The CEO isn't the only one losing his role as a result of the problems at Postnord: head of finance Gunilla Berg will also leave her post.

Jansson said that the changes weren't due to any failures by either Ericsson or Berg, adding “they have done fantastic adaptation work”.

Postnord's head office in Solna, north of Stockholm. File photo: Anders Wiklund/TT

Digitalization woes

When the board refer to market changes and a need to adapt, the big problem they're facing is a falling volume of mail in Sweden linked to an increasingly digital society.

In the second half of 2018, the amount of letters posted fell by a record amount.

This prompted Ericsson to write to the Swedish government asking for the law on letter postage prices to be changed. He requested a one-krona increase “in order [for Postnord to] conduct its societal function with financial viability”.

Growing losses

Last year, Postnord had an operating loss of 855 million kronor, a huge seven-fold increase on the previous year. This was mostly due to linked to staff turnover in the Danish business.

Speaking after the announcement of Ericsson's departure, Jansson said he saw two main challenges ahead for Postnord. The first was adapting to changes in how letters are sent, and understanding customer needs, while the second is coping with parcel delivery, which in contrast to letters has increased sharply in recent years along with the rise in e-commerce.

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Photo: Tomas Oneborg/SvD/TT

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Additional fees

As well as calling for increasing letter postage in general, Postnord has already had to introduce extra fees during busy periods.

The postal service introduced a “capacity supplement” over the busy Christmas period, to compensate for its increased costs such as paying for extra transport, hiring more drivers, and extending opening hours in some locations.

The fee of four kronor per parcel only applied to business customers, not private customers, meaning that it was up to individual companies to decide whether to pass the cost increase on to their own customers. This fee was in place between November 15th and December 31st, covering Black Friday as well as the Christmas break.

No post on Sundays and longer delivery times

From the start of July, postboxes will no longer be emptied on Sundays. Of the almost 22,000 postboxes in Sweden, around 2,400 have previously been emptied on Sundays.

This follows an earlier announcement from Postnord that they will test mail collection every other day instead of every day in some areas, with the intention of expanding this to the entire country next year.

Postal mix-ups

Postnord has tumbled in public confidence surveys, with rising complaints of late deliveries and some which never reach the recipient at all. Jansson said the service has “never had such high quality as today”, but public confidence in Postnord went from 50 percent to 11 percent between 2015 and 2018, according to a recent trust survey.

Although unconnected to the service's financial woes, Postnord received some bad PR when an undelivered bag of votes for the 2018 election meant 145 ballots went uncounted in a Dalarna town, forcing a rare re-election.

Falun Municipality and Postnord have disagreed on who was to blame for the mix-up, with councillors saying the mail service was responsible for delivering all early votes and Postnord saying the municipality never ordered this service.

What is Postnord anyway?

Postnord is a Nordic postal service. It was formerly known as Posten in Sweden (and before that, Kungliga Postverket or The Royal Postal Agency from 1683) but merged with its Danish counterpart, PostDenmark, in 2009 to become Postnord, which today is jointly owned by the Swedish and Danish governments. It's Sweden which has a majority 60 percent share.

In 2018, it was responsible for the distribution of over 3 billion letters and 1.7 million parcels.

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How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.”