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Royal Mail has been fined more than £10m by the postal regulator for missing its delivery targets, with more than a quarter of first-class mail arriving late.
Ofcom, which fined the company £5.6m for the same failure of its regulatory obligations last November, said Royal Mail took “insufficient and ineffective steps” to improve its performance this year.
Under the regulator’s rules, Royal Mail must deliver 93% of first-class mail within one working day of collection, and 98.5% of second-class mail within three working days of collection.
Ofcom’s investigation found that in the year to the end of March the company delivered only 74.7% of first-class mail on time, and 92.7% of second-class mail within the regulatory time period.
The company blamed its poor performance on its “challenging financial position”, and delays to the ballot on a deal that followed last year’s industrial action.
“We do not consider either of these to be justifiable reasons for Royal Mail’s failure to provide the levels of service expected of it,” said Ofcom.
“Ultimately, it is for the company to manage its financial position taking account of its obligations. Royal Mail took insufficient and ineffective steps to try and prevent this failure, which is likely to have impacted millions of customers who did not get the service they paid for.”
Ofcom said Royal Mail’s performance was only “marginally better” this year and that it needed to do “much better”.
The deterioration in delivery times will put further pressure on the company’s bosses just as a takeover deal is near to being finalised.
Ofcom said that the £10.5m penalty, which is ultimately paid to the Treasury, could have been £15m but it was reduced because of Royal Mail’s “admissions of liability and agreement to settle the case”.
“With millions of letters arriving late, far too many people aren’t getting what they pay for when they buy a stamp,” said Ian Strawthorner, the director of enforcement at Ofcom.
“Royal Mail’s poor service is now eroding public trust in one of the UK’s oldest institutions. We’re seeing some signs of progress, but it must go further and faster to deliver the service that people expect.”
A spokesperson for Royal Mail said the company had continued to “implement substantial changes to drive improvements” in mail delivery this year.
The Communication Workers Union (CWU) said the poor performance was a “direct result of the deliberate, sustained dismantling of UK postal services by a failed board and senior management team”.
Royal Mail continues to vigorously lobby Ofcom to let it reduce deliveries of second-class letters to two or three days a week, cutting nearly 1,000 jobs and saving £300m a year in the process.
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It proposed paring back the daily Monday-to-Saturday second-class service to “every other weekday”, as letter delivery volumes plummet in the digital age.
“Delivering great quality of service is extremely important to us and we are making the necessary changes to deliver for our customers,” said the spokesperson. “However, it is essential that these efforts are backed by urgent reform of the universal service, restoring it to a level that meets the needs of today’s postal users, not the needs of customers 20 years ago.”
In September, Ofcom said it would “assess” whether certain changes to second-class letter delivery would meet postal users’ needs, before a formal consultation due early next year.
The CWU said its members would not agree to any service changes until there were significant improvements at the company.
“We need to be very clear – there will be no agreement to these changes from the CWU unless we see quality restored and the terms and conditions of our members improved,” said the union’s spokesman.
Last month, the parent company of Royal Mail said it was considering job cuts and price rises on stamps and parcels as it blamed the Labour government’s first budget in 14 years for adding £120m to its costs.
The fine comes as the Czech billionaire Daniel Křetínský’s takeover bid for Royal Mail is reportedly close to being finalised. The £3.57bn takeover by Royal Mail’s largest shareholder, Křetínský’s EP Group, was agreed by parent company IDS in May.
However, the sale of the formerly state-owned service by a foreign buyer is being examined by the government under the National Security and Investment Act.
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