UK postage prices to change to reflect costs of handling mail

The price of a basic First Class stamp will go up from 28p to 30p from 7 April 2005, Royal Mail confirmed today. Many business mail services will see very much smaller increases and, in some cases, real decreases, as Royal Mail takes the first steps toward rebalancing its prices to reflect actual costs and prepares for full competition in the market.

The basic rate for Second Class mail will remain at 21p for all customers and overall the price of postage for 40% of Royal Mail’s daily mailbag of some 83 million items will not change.

Royal Mail’s Chief Executive Adam Crozier said that with the UK mail market potentially fully open to competition from January 2006, it was essential that Royal Mail’s postage prices started to reflect the true cost to the company of collecting, sorting and delivering mail. Mr Crozier also said that the current system under which some customers cross-subsidise others could not continue in an open market.

“Stamps will remain great value and our prices overall are still falling in real terms. First Class postage will still be cheaper than almost anywhere else in the rest of the EU – where the average price of a First Class letter is 36p. In Spain a 60g letter costs 45p to send, 79p in France, 80p in the Netherlands, 95p in Germany and even £1.12 in Italy,” said Mr Crozier.

The changes are in line with the formula agreed by the postal regulator Postcomm, setting a three-year below inflation control for changes to Royal Mail’s prices that is valid until 31 March 2006.

“Royal Mail last year lost around 5p for every First Class stamped letter posted and around 9p for every Second Class stamped letter posted. Business customers cover those costs. As more competitors chase those big customers, we need to reduce that subsidy if we are to compete on a fair and equal basis,” Mr Crozier continued. “Customers should pay prices that are related to the cost of the postal services we are providing. Many business customers will see a decrease in postage prices or will be able to post at the discounted rate.”

Prices for some bulk business mail services will decrease slightly. Special Delivery Services, international mail and parcels sent by Royal Mail will cost more, but there will be no change to Parcelforce Worldwide’s prices for express, time-guaranteed parcels.

Royal Mail also announced that under changes to its terms for paying compensation, the company will return more money to bulk business customers for the disruption to services caused by last autumn’s unofficial strike action. Following consultation with customers and stakeholders, Royal Mail is giving a three day grace period to around 600 business customers whose payments have fallen outside the formal payment period for certain administrative or technical reasons. Royal Mail will be contacting all these customers by the end of January 2005 to credit their accounts.

“We have listened to our customers and our compensation scheme is one of the best in the world – we are one of the few postal companies to pay out for delay,” said Mr Crozier. “Every letter is important to us and we are absolutely committed to delivering a high quality service to customers. If we don’t achieve these high standards, then it’s right that we compensate our customers accordingly. The changes announced today will mean we will be returning some £7 million more to business customers, bringing the total amount returned to all customers to almost £60 million.

“Royal Mail has just turned a loss of £1 million a day into a profit of the same level and this money is being invested back into our business, in our people and in improving our quality of service to customers. With over 92% of First Class letters arriving the next day, we are currently delivering some of the best performances in a decade,” Mr Crozier added.

Ends

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Notes to Editors
· The basic First Class stamp will rise by 2p to 30p. First Class postage for heavier items will rise between 5.2% and 9.5%. Franked and Printed Postage Impression (PPI) mail will get a 1p discount up to 60g, and discounts ranging from 3p to 8p for heavier items, subject to Postcomm’s ongoing consultation process.
· It costs Royal Mail less to handle business, franked or PPI mail and we therefore believe that customers using these services should pay less for their postage. Customers sending First Class mail that is franked or uses a PPI will get a 1p discount – meaning they will pay 29p for a 60g letter.
· There are 210,000 customers using franking machines and 27,000 PPI customers.
· The basic Second Class stamp will remain at 21p.
· Postage for postcards sent to destinations outside Europe will rise by 4p for both Zone 1 and Zone 2, from 43p to 47p.
· International prices will rise between 5% and 6.9%. The cost of the “E” stamp for airmail postage to European countries weighing up to 20g will rise from 40p to 42p.
· Special Delivery, Royal Mail’s guaranteed, next-day service, will rise from
£3.75 to £3.85 for the basic service. Royal Mail’s Special Delivery 9am service will increase from £6.95 to £7.95.
· Parcels sent by Royal Mail will increase by up to 4%.
· Prices will fall for some business mail services, including mail sent through Mailsort (for large volumes of mail that is pre-sorted by customers) and Cleanmail (for large volumes of machine-readable mail, sorted by value and presented to Royal Mail in trays by the customer).
· Royal Mail stamp prices easily beat the rest of Europe in terms of value-for-money. For a 60g letter, Royal Mail’s First Class stamp price compares to 45p in Spain, 78p in France, 79p in the Netherlands, 95p in Germany and £1.12 in Italy.

· Royal Mail lost £247 million on stamped mail in 2003/04.
· Since 1994, the retail prices index (RPI) has risen 33 percentage points – over the same period, a First Class stamp has risen by just 12%, from 25p to 28p.
· Under Royal Mail’s bulk compensation scheme for delayed mail, business customers are eligible for compensation if their accounts have been paid 80% “to terms” (within 21 days) throughout the financial year.