UK Post Office strangling branches

Thousands of post offices face the axe because of red tape that subpostmasters say will ruin their businesses. They believe that the Post Office's archaic curbs on how they work are stifling opportunities to thrive. But their efforts to overturn what they see as unfair terms in their contracts with the Post Office have been rebuffed. The Association of Convenience Stores, which has 10,000 post office members, lodged a complaint with the Office of Fair Trading last December over the contracts between the Post Office and subpostmasters. The association, backed by the Postmasternetwork website, claims that the contract is anti-competitive because it prevents sub-postmasters who run their own businesses from operating on equal terms with other retail outlets.
But after a ten-month review, the OFT says it is closing its file unless the association can supply new evidence within the next few weeks.

The contract, which has not changed in more than a decade, forbids subpostmasters from undertaking in a private capacity any business that the Post Office also provides.

Among key services on the banned list are using the foreign exchange services or lottery products of another company other than the Post Office provider.

The Post Office pays a commission to sub-postmasters for carrying out the business. But Gary Coyle of Postmasternetwork, which helps sub-postmasters to find new sources of income, says other companies would pay more for the same transactions.

The National Lottery provider Camelot, for example, pays 5p in every £1 on sales of lottery tickets, yet the Post Office pays its sub-postmasters only 4p.

Sub-postmasters are also given no choice over the financial services products that they are allowed to provide.

Coyle, who runs his own post office in Sutton Valence, Kent, says: 'The OFT decision will spell the end for thousands of post offices.

'For years. the Post Office has promised to develop new productsand services across the entire network. Yet it has failed to do so, leaving sub-postmasters like me struggling to make ends meet.

'Our only hope of survival is to develop our own profitable lines of business, but we can only do so if we are allowed to compete freely with the Post Office in the private domain.

'It is a travesty that the Post Office is allowed to hide behind a European law that allows it to keep an unfair monopoly on subpostmasters.'

James Lowman of the Association of Convenience Stores says it plans to challenge the OFT decision. 'The Government is contradicting itself,' he says.

'On the one hand, it is paying £150m a year to prop up the rural post office network, yet on the other it has prevented it from being commercially viable.'

He adds: 'By refusing to address the unfair terms in the Post Office contract, the Government will force many sub-postmasters to abandon their businesses simply because they are prevented from being competitive.'

The Post Office says: 'We have fully co-operated with the OFT inquiry and we welcome its intention to close its investigation.

'The terms of the contract with sub-postmasters are designed to ensure that they do not compete with us in relation to our core products and services.

'If they did, we would lose revenue that is essential to maintaining our branch network.'

The sad decline of a massive network

THE Post Office has the biggest retail network in Europe with 15,000 outlets. Yet in 1999, there were almost 19,000 branches. The network has been slashed in recent years with the closure of one-third of its urban branches since 1999.

The rural branch network faces similar pressures. This has been due largely to the switch to direct payment of benefits, causing post office revenues to dive.

Since 2000, the Post Office has been required to prevent avoidable rural closures and the Government announced a three-year support package of £450m for rural branches in 2002. That was extended in September last year with an additional £300m in Government support until 2008.

More than 90% of post offices are run by subpostmasters, with most being based in shops providing other business.

Delivery services will be deregulated in January, yet the Post Office contract will not allow sub-postmasters to use other postal service operators.

Royal Mail, which owns the Post Office, was losing £1m a day when Adam Crozier, former Football Association chief executive, took the helm in February 2003.

Though profits have improved, the workforce has been slashed by 33,000 to 200,000 and almost 3,000 branches-have gone.