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Royal Mail reckons it could save as much as £250m a year by scrapping Saturday letter deliveries, which it says could lead to lower stamp prices and increased staff wages.
The savings could slash the company’s projected annual losses for this year, which are expected to be between £350m to £450m, by more than half, according to calculations seen by Thisismoney. The projected savings are much higher than previous estimates of £125m-£225m made by the regulator Ofcom in 2020.
Royal Mail is currently legally required to deliver letters to every address in the UK six days a week under what is known as the Universal Service Obligation (USO). It is the only postal and courier service which has this obligation, and has been pushing for deliveries to be cut to five days as the number of posted letters has fallen, pointing to the 2020 Ofcom report which concluded reducing letter deliveries to five days a week would meet the needs of 97 per cent of users. The source said that such a saving could provide enough financial wiggle room to increase pay for its staff as well as lower stamp prices.
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However the Government has refused to reduce the USO, with business minister Kevin Hollinrake saying in December there were ‘no current plans’ to allow any changes. Any alterations to the USO would need to be made through legislation and agreed by Parliament.
“It is clear that when letter volumes have declined by more than 60 per cent, to be financially sustainable the USO requires major reform now,’ a Royal Mail spokesman told Thisismoney. “This change is critical. Being required to provide a service that customers have said they no longer need, at significant structural cost to Royal Mail, increases the threat to the sustainability of the Universal Service.”
Last summer, Royal Mail chairman Keith Williams told the BBC that the struggling company was losing “£1m per day”. He said the pandemic had given it extra business from posting testing kits and a jump in online deliveries that made a profit of £758m last year, but this was a one-off.
However The Communications Workers Union has accused Royal Mail of “pleading poverty” in a long-running pay dispute which saw thousands of posties walk out on strike for 18 days last year.
The push to reduce comes as Royal Mail scrambles to become more competitive against the likes of Amazon, but some publishing groups have warned scrapping Saturday deliveries could have a catastrophic effect on magazine publishers, many of which post new editions on Fridays and Saturdays.
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