Royal Mail faces fine as almost one in four first-class letters arrive late

Royal Mail is facing the threat of a fresh fine after delivering almost one in four first-class letters late.

The postal service fell short of its targets for letter deliveries in its latest financial year, triggering an Ofcom investigation that could lead to a sanction.

If confirmed, it would be the third consecutive year of financial penalties for Royal Mail over its poor performance.

In December, Ofcom slapped the company with a record £10.5m fine for failing to meet delivery targets, while in 2023 it was fined £5.6m for the same reason.

Under Royal Mail’s universal service obligation (USO), it is required to deliver 93pc of first-class mail within one working day of collection and 98.5pc of second-class mail within three working days.

However, the company said on Friday it had delivered just 76.5pc of first-class letters and 92.2pc of second-class post within these deadlines in the year to March.

The figures marked a small improvement on the previous year. Royal Mail said it was improving reliability through a number of measures including reducing sickness absences, extending delivery times and increasing use of automation.

However, bosses have long argued that quality of service is being hampered by onerous requirements under the USO.

USO ‘needs urgent reform’

The postal service, which made a loss of £348m in the year to March 2024, has called for an easing of rules to reflect the sharp decline in letter sending in recent years.

Ofcom has outlined plans to allow Royal Mail to end second-class letter deliveries on alternate days and Saturdays, as well as watering down the main quality of service targets.

While the company is supportive of these plans, it has pushed back against so-called “tail of the mail” targets.

These cover letters that miss the initial USO requirement. Ofcom is pushing Royal Mail to be required to deliver virtually all letters within three days for first class and five days for second class.

Bosses have warned these rules would add “significant” costs and lead to further increases in stamp prices for consumers.

Alistair Cochrane, Royal Mail’s chief operating officer, said: “Our quality of service is not yet where we want it to be and we will continue to work hard to deliver the standards our customers expect. We are actively modernising Royal Mail, and while these efforts are beginning to deliver results, we know there is still more to do.

“We will continue to engage with Ofcom throughout their investigation, providing information about the steps we have been taking to improve. But we cannot address the structural challenges we face alone, urgent reform of the Universal Service is essential to provide a more reliable and sustainable service for the benefit of all our customers.”

Royal Mail’s lagging performance will prove a major challenge for Daniel Kretinsky, the Czech tycoon who last month sealed his £3.6bn takeover of the 500-year-old postal service.

Mr Kretinsky has committed to maintaining the USO, alongside a number of other legally binding undertakings linked to his takeover.

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