Royal Mail owner signals price hikes could be on the cards after Reeves’ tax changes

Further Royal Mail price hikes could be on the cards after the owner of the postal service flagged greater cost pressures arising from the Autumn Budget. 

International Distribution Services said it could not rule out price hikes and greater use of automation as it looks to cut costs after returning to a first-half profit.

IDS, which also owns parcels network, GLS, joined other businesses in warning of higher prices after Rachel Reeves raised employers’ national insurance contributions. 

The changes will cost Royal Mail, which employs around 130,000 people in the UK, around £120million extra a year, according to IDS.

Boss Martin Seidenberg said the tax hit disproportionately impacts the business relative to its parcel competitors.

‘This makes Universal Service reform even more urgent,’ Seidenberg added.

The business has repeatedly called for Ofcom to speed up reform of what it terms as an ‘old-fashioned’ universal service regime which obliges it to deliver mail to all UK addresses, six days a week, at a uniform price. 

Seidenberg has been focused on transforming Royal Mail into a more modern operation by, among other initiatives, automating parcel hubs and expanding its parcel lockers and drop-off locations. 

He told reporters on Thursday it was too early to say whether its actions to mitigate the rise in national insurance contributions could lead to potential job losses.

The group said it was on track to achieve its full-year forecasts and ‘well prepared’ to deliver Christmas.

IDS reported adjusted operating profit of £61million for the six months ending 26 September, against a loss of £169million a year earlier.

Higher wage inflation in Germany and Italy also hurt margins at GLS, the group said. 

IDS, which agreed to a £3.57billion takeover by Czech billionaire Daniel Kretinsky in May, said it continued to expect the deal to close in the first quarter of 2025.

Kretinsky’s bid of IDS, the owner of one of the world’s oldest postal firms Royal Mail, is currently being reviewed under the National Security and Investment Act to assess any potential concerns.

IDS shares fell 1.09 per cent or 3.8p to 346.20p on Thursday, having risen over 44 per cent in the last year.  

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