“Royal Mail has systemically failed to deliver against parts of its Universal Service Obligation”

The Business, Energy and Industrial Strategy Committee has recommended that Ofcom undertake an enforcement investigation into Royal Mail’s delivery of the USO and to report to the Committee by the end of 2023. 

Below are excerpts from the report.

“The Committee published the report about Royal Mail following  two oral evidence sessions held with its senior management team, and it sets out its conclusions in two areas: the use of data from Postal Digital Assistants (PDAs) for performance management, and Royal Mail’s commitment to delivering the Universal Service Obligation (USO), which includes a requirement for Royal Mail—as the provider of the statutory universal postal service—to deliver letters six days of the week.

“The first of those two evidence sessions was held on 17 January 2023. Its purpose was to examine Royal Mail’s performance against its targets, its financial position, and its request to the Government for an amendment to the USO. As the provider of the USO, Royal Mail is accountable to the postal services regulator, Ofcom, and, as the Minister responsible for postal services, the Parliamentary Under Secretary of State at the Department for Business and Trade. The Committee has oversight of the Department for Business and Trade, and the Committee has undertaken this work on that basis. It is important to note that the Committee does not have the power to instruct Royal Mail how to run its business but instead has the power to ask questions of, and make recommendations to, the Parliamentary Under Secretary of State.

” In the weeks which followed that evidence session, the Chair and Committee received more than 1,000 emails. The vast majority were from postal workers, casting doubt on some of the statements made by the Chief Executive Officer of Royal Mail (Mr Simon Thompson) during the session. We are grateful to those who contacted us for providing their personal experience, which informed our proceedings. We have published on our website a small sample of the information contained in those emails. We have not, however, published all the submissions due to the time it would take to secure the consent of everyone that contacted us.

“The information provided by postal workers led us to conclude that Mr Thompson might not have given wholly accurate answers during his evidence to the Committee on 17 January. Due to the volume of information provided to the Committee, which failed to align with the answers provided by Mr Thompson, the Committee Chair recalled Royal Mail to give further oral evidence, alongside the Chair of International Distributions Services (IDS—the parent company of Royal Mail plc). The Chair set out in his letter to Mr Thompson three areas that required clarification or correction: the use of Postal Digital Assistants (PDAs) for performance management, the relative prioritisation of parcels and letters, and Royal Mail’s sick pay policy.

Royal Mail’s Future

“Royal Mail is going through a troubled time, in terms of performance, finances, and relations between its management and the workforce. Its performance against the quality of service targets set by Ofcom has been consistently poor in recent years…..

Simon Thompson, the Chief Executive Officer of Royal Mail told us that:

“If we go back to the point of privatisation, between our group of Royal Mail and GLS, Royal Mail in the UK represented 83% of the turnover in the business. From a profitability perspective, it was about 73%. Where we are at today is that Royal Mail in the UK, from a turnover perspective, is about 60%, but from a profitability perspective it is zero. As you have quite rightly identified, we are losing £1 million a day.”