Royal Mail may face price cap on first-class stamps

Regulators are to consider tighter controls on Royal Mail, such as capping the cost of first-class stamps after prices surged 170 per cent over the past ten years.

Royal Mail secured a boon for its finances this month when Ofcom, the postal regulator, agreed to scrap second-class letter deliveries on Saturdays and switch them to every other weekday.

Ofcom estimated that Royal Mail could make between £250 million and £425 million of savings from the changes.

The regulator is alert to fears that Royal Mail, now owned by the “Czech sphinx” billionaire Daniel Kretinsky, could increase first-class stamp prices to force the public to switch to cheaper second-class stamps, whose deliveries have been significantly watered down under the July changes.

First-class stamp prices are unregulated and uncapped, while second-class stamps are heavily regulated. Whereas first-class stamps have increased in price from 63p to £1.70 over the past ten years, second-class prices have risen by a more modest 61 per cent from 54p to 87p.

Natalie Black, director for networks and communications at Ofcom, said: “We have committed to keeping the cap on the price of second-class stamps and we have also announced a review into affordability.

“When we’ve been talking to people up and down the country — this is consumers, small businesses, big businesses — the two things that they really care about are affordability and reliability.”

Natalie Black: “All options are on the table”

OFCOM

The Ofcom review will commence early next year. Black said: “We recognise people of course care about the price of stamps. And by launching this affordability review, we’ll be looking at all the options that could be on the table in terms of tackling some of these issues.”

Asked whether this could lead to the price of first-class stamps being capped, Black responded: “All options are on the table.”

A spokesman for Royal Mail said: “We always consider stamp pricing very carefully. A complex and extensive network of trucks, planes and 85,000 posties is needed to ensure we can deliver across the country. With letter volumes in structural decline and the number of addresses rising, the cost of delivering each letter inevitably increases.

“Stamp prices still compare favourably to other European countries. For second-class stamps, the European average is £1.51 compared to 87p in the UK and £1.85 for first-class compared to £1.70.”