Royal Mail fined £10.5m for missing delivery targets

Royal Mail has been fined £10.5m by the regulator Ofcom for failing to meet delivery targets for first and second class mail.

The fine is almost double the penalty the company was hit with last year for the same reason.

Ofcom said Royal Mail’s poor service was “now eroding public trust in one of the UK’s oldest institutions”.

Royal Mail owner International Distribution Services (IDS) said it had carried out “substantial” reforms this year to try to drive improvements.

“We are making the necessary changes to deliver for our customers,” IDS said.

However, Ofcom director of enforcement Ian Strawhorne said: “With millions of letters arriving late, far too many people aren’t getting what they pay for when they buy a stamp.

“Royal Mail has provided an improvement plan, and we’re seeing some signs of progress, but it must go further and faster to deliver the service that people expect.”

Citizens Advice, a charity that offers free financial and legal advice, said “failing to hit a single delivery target for nearly five years is simply unacceptable”.

“Letter delays leave millions of people missing urgent medical appointment letters, legal documents and benefit decisions,” said Tom MacInnes, its director of policy.

“This comes despite Royal Mail routinely hiking their prices, meaning consumers are getting less despite paying far more.”

Royal Mail was privatised more than a decade ago, but under the Universal Service Obligation it is still legally required to deliver letters across the UK at a set price six days a week.

Under Ofcom’s rules, the postal operator is meant to deliver at least 93% of first class mail within one working day, and 98.5% of second class post within three working days.

However, in the year to the end of March it missed both targets, reaching figures of just 74.7% and 92.7% respectively.

Ofcom said the company had blamed its poor performance on its challenging financial position, and on delays to a ballot on a pay deal following strike action by members of the Communication Workers’ Union (CWU) last year.

However, Ofcom said: “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.

“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.”

The CWU said Royal Mail’s poor performance was due to a “deliberate, sustained dismantling of UK postal services by a failed board and senior management team” rather than union action.

It said the last day of national strike action was in December 2022, so to partially blame missing delivery targets in 2023-24 on the CWU “shows the lack of credibility and integrity” by the board.

Last year, Royal Mail was fined £5.6m for failing to meet delivery targets in 2022-23.

Ofcom said that in addition to the fine, it had been pressing the company to see what it was doing to improve its performance.

While there had been some progress, it said the improvement in 2023-24 had only been marginal and “it needs to do much better”.

The main reason Ofcom nearly doubled the fine was due to the harm to consumers, a spokesman said, plus the regulator felt it had taken inadequate steps to address its previous concerns.

News of the fine comes at a time when Royal Mail’s parent, IDS, is facing a probable takeover by the Czech billionaire Daniel Kretinsky’s EP Group.

In recent years the business has struggled to make money. Its letters business has declined dramatically, with the volume being sent having halved since 2011.

However, last month IDS said its revenues had increased by 10% in the six months to the end of September, compared to the same period in 2023.

It made an operating loss of £26m, compared to £243m the year before.

Ofcom has been looking at ways in which the Universal Service could be reformed. In September, it said it would look at whether changes to second class deliveries, while continuing a six-day-a-week service for first class post, would meet customers’ needs.

It had previously suggested Royal Mail could save hundreds of millions of pounds a year if it reduced its mail deliveries to five or even three days a week.

In its response to Ofcom’s fine, IDS said it was essential that its own efforts to improve services were 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”.

It said this would help to create a “modern, sustainable and reliable” postal service.

Ofcom’s Ian Strawhorne said “regardless of its ultimate owner, we’ll continue to hold Royal Mail to account”.