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Ofcom issued the second fine in just over a year to the postal service after Royal Mail failed to improve service levels.
Royal Mail failed to meet its first- and second-class delivery targets in the 2023/24 financial year. Just 74.7% of first-class mail and 92.7% of second-class mail was delivered on time, well short of the targets of 93% and 98.5% respectively.
Royal Mail was fined £5.6m by Ofcom in November 2023 for its performance in 2022/23. Cash from the fines is passed on in full to the public purse.
Ofcom’s rules require Royal Mail to deliver, in each financial year, 93% of first-class mail within one working day of collection and 98.5% of second-class mail within three working days of collection.
If Royal Mail misses its annual targets, the regulator can consider evidence of any exceptional circumstances beyond the company’s control – such as the Covid-19 pandemic – and whether it would have achieved its targets had those events not occurred.
The company blamed its poor performance on its “challenging financial position”, and delays to the ballot on a deal that followed the previous year’s industrial action.
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But Ofcom didn’t consider either of these to be justifiable reasons for Royal Mail’s failure to provide the levels of service expected of it.
As well as fining the company, Ofcom has been pressing Royal Mail on what it is doing to turn things around. The regulator found there had been some progress, but its overall performance in 2023/24 was only marginally better than its reported performance in 2022/23.
Ofcom said Royal Mail needs to set out “a clear, credible and publicly communicated plan” about how it will get back on track through “meaningful, sustainable and continuous improvements for customers”.
‘Poor service is now eroding public trust’
When deciding the level of the fine, Ofcom considered the harm suffered by customers as a result of Royal Mail’s poor service. But the regulator also has a duty to ensure the postal service is financially sustainable.
The financial penalty of £10.5m will be passed in full to HM Treasury. The fine includes a 30% reduction from the £15m Ofcom would otherwise have imposed, reflecting Royal Mail’s admissions of liability and agreement to settle the case.
Ian Strawhorne, director of enforcement at Ofcom, 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’s poor service is now eroding public trust in one of the UK’s oldest institutions.
“This is the second time we’ve fined the company since the pandemic. 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.”
