Major shake-up of Royal Mail deliveries on the way

The regulator has set Royal Mail new delivery targets to protect people from long delays receiving their mail. Monday to Saturday deliveries for first-class post will stay in place.

Since 2011, Royal Mail has been required under the ‘universal service obligation’ to deliver first- and second-class letters six days per week. But in that time, the number of letters sent each year has more than halved. With fewer letters being delivered to each house on a given round, the cost of delivering each letter has increased, and Royal Mail has lost hundreds of millions of pounds in recent years.

Ofcom found that urgent reform is needed for the universal service to survive. So to improve reliability and to prevent people from paying higher prices than necessary, it has changed the obligations imposed on the company.

This follows public consultation with thousands of people and organisations – including consumer groups, unions, small businesses, public services, Royal Mail and the wider postal industry.

Ofcom has also launched a review of pricing and affordability, which will consider concerns that many people and organisations have raised about stamp prices.

‘Urgent reform’ is ‘necessary’

Natalie Black, Ofcom’s group director for networks and communications, said: “These changes are in the best interests of consumers and businesses, as urgent reform of the postal service is necessary to give it the best chance of survival.

“But changing Royal Mail’s obligations alone won’t guarantee a better service – the company now has to play its part and implement this effectively. We’ll be making sure Royal Mail is clear with its customers about what’s happening, and passes the benefits of these changes on to them.

“As part of this process, we’ve been listening to concerns about increases in stamp prices. So we’ve launched a review of affordability and plan to publicly consult on this next year.”

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: ‘’The change to less frequent second-class deliveries will be music to the ears of Royal Mail’s new owner, EP Group. Royal Mail had been reining in losses, thanks to higher stamp prices, but there has been a lot riding on expectations of regulatory change. Letters have long been in structural decline, as email, text and social media updates have taken over as correspondence.

“Royal Mail’s public service obligation was weighing down its transformation. Maintaining an infrastructure for a six-day-a-week universal service when volumes have been dwindling hasn’t been a recipe for an efficient operation, and it has arguably held back change. Although the Monday to Saturday service will remain for first-class letters, which means urgent correspondence will still get through, the adjustments will relieve the pressure to deliver and will help trim costs.

“But inevitably, it has raised questions about how expensive stamp prices have become. They were increased partly to help maintain the universal six-day service, but now these changes have been made, it’s not surprising Ofcom is now looking closely at the affordability of using the post. It’s unlikely to give the green light to any more hikes any time soon.”