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A first class stamp will rise above £1 for the first time in history unless Grant Shapps lets Royal Mail scrap Saturday letter deliveries, the company has warned.
Royal Mail chairman Keith Williams said a “considerable” increase in the cost of a first class stamp would be needed to balance the books if it has to continue with a six-day letter delivery service.
First class stamps rose by 10p to 95p in March, putting them on track to rise above £1 for the first time if Royal Mail is made to continue weekend deliveries.
Mr Shapps told a House of Commons committee this week that he would not approve Royal Mail’s plans to axe Saturday rounds. Royal Mail wants to axe weekend letter deliveries in the face of declining volumes.
“The cost to us is driven in part by [the fact that the] volume of letters has declined,” Mr Williams said. “You’re delivering the same number of letters over six days when you could be doing it over five. So that is forcing up stamp prices.”
Asked how much first-class stamps would have to rise if Saturday letters continued, Mr Williams told The Telegraph: “It’s considerable.”
“The quid pro quo here is actually stamp prices.”
Second class stamps are more heavily regulated than first-class equivalents, giving Royal Mail less scope for price increases. Second class stamps increased by a more modest 2p to 68p in March.
The push to axe the Saturday letter round comes as Royal Mail struggles to compete on parcel deliveries with rivals such as Evri, DPD and Amazon. Royal Mail says the company is losing £1m a day and that without radical changes, the business has no future.
Royal Mail is legally mandated to deliver letters six days a week but Mr Williams said that regulator Ofcom had accepted customer feedback that found 97pc of people are “happy with five days” deliveries.
It is battling a wave of strikes as it struggles to push through modernisation proposals, which include more automation as well as scrapping the six-day letter service.
Mr Williams told The Telegraph that Royal Mail is entitled to generate a profit margin of between 5pc and 10pc under post-nationalisation regulations.
“We’ve made that margin in [just] two years since privatisation,” Mr Williams said.
“And [Ofcom] can see we’ve not met the financial sustainability [targets]. And now we’re stuck between the Government and Ofcom, quite frankly, playing tit for tat. And in the meantime, nothing’s happening.
“Grant Shapps was in the Commons select committee… saying nothing’s going to change. That doesn’t mean to say it doesn’t need to change.”
Meanwhile, delivery costs have jumped at some of the UK’s leading retailers in recent weeks, as postal strikes leave stores scrambling to get gifts out to customers on time.
At John Lewis, charges are up 14pc since the start of November, meaning standard delivery on items over £50 now costs £4.50, up from £3.95. Argos has increased its fast-track delivery charges by a fifth, or £1.
Some retailers including Oliver Bonas have stopped offering click and collect for customers until after Christmas, leaving shoppers with fewer options to guarantee their presents will arrive in time for next weekend.
A spokesman for John Lewis said: “Retailers are facing increasing delivery costs, but we’re working hard to keep our prices as low as possible.”
An Argos spokesman said: “Our delivery pricing varies – our morning slots are available from £3.95 and the afternoon and evening slots cost £5.95. For fast track, next day delivery costs £3.95 and same day delivery costs £5.95. We regularly review our services and prices and are committed to offering customers value on the things that matter most for all of life’s moments.”
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