Ofcom allows Royal Mail to change second-class post deliveries

In an announcement today (10 July), the regulator said UK postal users would have extra protections against long delivery delays under the reforms, which it said will enable Royal Mail “to improve reliability and support a sustainable service”.

Since 2011, Royal Mail has been required under the universal service obligation to deliver First and Second Class letters six days a week.

But in that time, Ofcom said the number of letters sent each year has more than halved and with fewer letters being delivered to each house on a given round, the cost of delivering each letter has increased, meaning Royal Mail has lost hundreds of millions of pounds in recent years.

In 2011/12, Royal Mail delivered 14.3 billion letters. In 2023/24, that number was 6.6 billion. Since 2008, Royal Mail’s revenues from letters have fallen from £6.9bn to £3.7bn. In 2023/24, Royal Mail made a loss of £348m, and in 2022/23 it made a loss of £419m.

“Urgent reform is needed for the universal service to survive. To put the service on a more sustainable footing, to prevent people from paying higher prices than necessary, and to push Royal Mail to improve reliability, Ofcom has today made changes to the obligations imposed on the company,” the regulator stated.

“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, as well as postal users directly – from right across the UK.”

Ofcom has also launched a review of pricing and affordability, which will consider concerns that many people and organisations have raised about stamp prices. It plans to consult on this next year.

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.”

Ofcom said its research has suggested that affordability and reliability are more important to people than speed of delivery, but that they value having a next-day service available for when they need to send the occasional urgent item.

Royal Mail will therefore continue to be required to deliver First Class letters the next working day, Monday to Saturday, and there will continue to be a cap on the price of a Second Class stamp.

“However, people have told us that most letters are not urgent, and they do not need six days a week delivery for the majority of letters. So, from 28 July, we will allow Royal Mail to deliver Second Class letters on alternate weekdays – still within three working days of collection – Monday to Friday,” Ofcom stated. 

“We estimate Royal Mail could realise annual net cost savings of between £250m and £425m with successful implementation of this change, enabling it to invest more in improving its delivery performance.

“We have told Royal Mail to hold regular meetings with consumer bodies and industry groups to hear about the experiences of people and businesses as it implements these changes.”

Ofcom said its research has also shown that small reductions in Royal Mail’s delivery targets would continue to meet people’s needs and that maintaining the current targets would carry higher costs that would need to be recovered through higher prices.

It has therefore made changes to Royal Mail’s existing delivery targets – for First Class mail from 93% to 90% delivered next-day, and for Second Class mail from 98.5% to 95% delivered within three days. It said these new targets are high by international standards.

“However, many people have experienced long delays where letters have taken weeks to arrive. To address this issue, we have set Royal Mail new enforceable backstop targets so that 99% of mail has to be delivered no more than two days late,” Ofcom added.

Last month, Ofcom opened an investigation into Royal Mail’s compliance with regulatory obligations, after the company posted its annual delivery performance results.

Reacting to today’s announcement, Martin Seidenberg, group CEO of Royal Mail parent company International Distribution Services (IDS), said: “We welcome today’s announcement from Ofcom.

“It is good news for customers across the UK as it supports the delivery of a reliable, efficient and financially sustainable Universal Service.

“It follows extensive consultation with thousands of people and businesses to ensure that the postal service better reflects their needs and the realities of how customers send and receive mail today.”

The takeover deal for IDS was declared unconditional at the end of April, and Daniel Křetínský, the founder and chairman of investment firm EP Group – IDS’ buyer – has now become chairman of both Royal Mail and IDS.