Evolution of post 

The future of the Postal Service’s Universal Service Obligation (USO) is one of the biggest live debates in the postal world. Already this year it has drawn a lot of attention with Post Danmark dropping its USO on the 1st of January, Royal Mail declaring “urgent action’ is needed to ensure the sustainability of postal services and UK regulator Ofcom requesting a national debate on the subject.

Post & Parcel speaks to Royal Mail, Citizens Advice and PostEurop to find out more. 

  The USO is the requirement, under the Postal Services Act 2011, that letters and parcels should be delivered to each home or business premises, on six days each week, throughout each EU country (with exemptions). At the heart of the USO is affordability. It was drawn up to ensure affordable postal services to all, regardless of location.  

However, while the postal market has changed inconceivably over the last 10 years the USO has been remained the same. 

Royal Mail has repeatedly called for major reform of the USO over the past four years, and wants the requirement to be reduced to a Monday-Friday service. A Royal Mail spokesperson explained that as a company they were proud to be the Universal Service provider and “remain committed to providing an affordable and sustainable ‘one price goes anywhere’ service for letters and parcels across the UK.” 

 However, the spokesperson continued to say that the service is in need of reform. 

“Letter volumes have fallen by more than 60% since their peak – from 20 billion in 2004/5 to 7 billion a year in 2022/3 – while the number of addresses has risen by four million in the same period. The environment has changed substantially, and we need to reflect that.”

“Ofcom’s 2020 User Needs research found that many changes to the Universal Service, such as reducing the number of delivery days for letters, would still meet the needs of the vast majority of consumers and SMEs.” 

Since September 2023, the communications regulator in the UK, Ofcom, has been gathering evidence on how the universal service might need to evolve to meet consumer needs more closely. 

As the postal regulator, Ofcom’s job is to ensure that a universal postal service is provided, taking account of the need for that service to be financially sustainable and efficient. 

The results of the report were published this in January 2024. Ofcom’s research shows that people are not currently getting a reliable service because of Royal Mail’s recent poor performance, for which Ofcom fined the company £5.6 million last year. 

In the report Ofcom has set out options for reform so there can be a national discussion about the future of universal post. In the meantime, Ofcom said it is making sure prices will remain affordable by capping the price of Second Class stamps. 

The regulator is inviting views on two primary options: 

• Making changes to existing First and Second Class and business products so that most letters are delivered through a service taking up to three days or longer, with a next-day service still available for any urgent letters. 
• Reducing the number of letter delivery days in the service from six to five or three. This would require Government and Parliament to change primary legislation. 

Ofcom estimates that Royal Mail could achieve a net cost saving of £100 million – £200 million if letter deliveries were reduced to five days; and £400 million-£650 million if reduced to three days. If the large majority of letters were delivered within three days, it could achieve net cost savings of £150 million-£650 million. 

Morgan Wild, Interim Director of Policy at Citizens Advice, found the review somewhat lacking. He says: “Given Royal Mail has failed to meet its targets for nearly half a decade, it’s clear the current Universal Service Obligation (USO) is falling short of its fundamental purpose: safeguarding consumers. Any changes must prioritise their needs, not Royal Mail’s bottom line.  

“We agree that improving reliability is essential. Late post has real consequences – people miss vital medical appointments, legal documents and benefit decisions.  

“Cutting services won’t automatically make letter deliveries more reliable, so we must see proposals to tackle the cause of Royal Mail’s persistent failings. Ofcom and the government have to spell out how any revised USO will start to deliver for the millions of us who rely on it.”   

Ofcom’s research of postal users, revealed that fewer delivery days could still meet most people’s needs and 9 in 10 people (88%) say reliability is important for letter deliveries, compared to 58% for delivery on Saturdays (down from 63% in 2020). 

Most participants in the research were also open to reducing some services and standards – particularly for letters – in the interests of keeping prices down and only paying for what was required. 

At this stage, Ofcom is not consulting on specific proposals to change the universal service obligation (USO). Some of the options, which are detailed in full in the document, would require Government and Parliament to change primary legislation, while others could be made through changes to Ofcom’s regulations. Ofcom will provide an update of their findings in the Summer. 

Martin Seidenberg, Group Chief Executive Office of IDS, responded to Ofcom’s call for debate: “Ofcom’s report demonstrates that reform is urgently needed to protect the future of the one-price-goes-anywhere Universal Service.   

“A modern and sustainable postal service is crucial for our people, our company and the customers we serve. We want to engage with all stakeholders as part of the process to find an outcome that will allow us to compete and adapt to today’s realities.” 

Wider view

The UK is not alone in experiencing changes to its postal volume and make-up. Other countries across the world have reviewed their USO specification in response to a changed national context and reduced the frequency of delivery or extended delivery times for letters – including Sweden in 2018, Belgium twice since 2020, and Norway and Denmark twice each since 2016.  

In December 2023 Post Danmark announced that it intended to end its USO, stating: “The new postal law in Denmark creates a new reality, which in turn means the implementation of a series of changes to our prices, offerings, and organisation. The adaptation of the mail business will be carried out in line with continuing market developments in Denmark.” 

However, when considering Post Danmark’s decision it is worth noting how digitalised Denmark is – it has seen a 90 % reduction in mail volumes since the start of this millennium and while 1 in 15 UK adults have never been online, this compares to only 1% of the population in Denmark. 

Other countries have responded to changes in the postal market by focusing on the potential social value of the USO. The French La Poste introduced a service where people can pay a small fee to have postal workers ‘check in’ on elderly or vulnerable friends or relatives. And Ireland’s An Post introduced ‘No Fixed Address’ back in 2018 to support homeless citizens.  

Speaking in December 2023 a Royal Mail spokesperson noted: “The UK is not immune to the trends that we see across the world. Many other comparable countries have already reformed their Universal Service, and the UK is getting left behind.” 

Botond Szebeny, Secretary General  of PostEurop  which represents 55 postal operators in 53 countries, describes the importance of the USO for the sector: “The postal industry, represented by PostEurop, serves approximately 800 million citizens on a daily basis and is a huge asset with our 2 million employees. It is the biggest collection, sorting, transportation and delivery network in the world, thus it has a significant valuable role in the economy and society. 

“We believe the USO plays an important role in economy and society also in the future, obviously in an adapted way. For example, in areas not fully covered by the market, particularly in rural areas, or in its role reaching vulnerable citizens such as the elderly population, or people who don’t or can’t have access to digital services. And while customers’ needs are changing, postal operators will remain a key part of the public infrastructure.” 

The USO is of particular importance for people in Scotland, where around 17% population lives in rural areas. Responding to the Ofcom publication in January, Director of Policy and Advocacy at Consumer Scotland Douglas White said: “Consumers across Scotland rely on the universal postal service. However, postal consumers’ experience in recent years has been affected by rising prices and late deliveries.  

“Ofcom should engage widely throughout the review process and ensure consultation with consumers in vulnerable circumstances and those in rural and remote communities,” he added. 

Postal consumers

Citizens Advice is the statutory advocate for postal consumers in England and Wales. Its role is to make sure postal services meet the needs of consumers – particularly those in vulnerable circumstances. The organisation published a report in November 2023 on the Future of USO. Beth Foley, Principal Policy Manager for Post at Citizens Advice describes the aim of the work. 

“Postal services – both in the UK and across Europe – are at a crossroads. On the one hand, post remains a fundamental pillar of our communications network. On the other hand, we have witnessed a digital upheaval in the way we communicate. Letter volumes have declined as a result and this raises questions about the future form of our postal services. 

Beth explains what the USO means for consumers. “The Universal Service Obligation (USO) is a fundamental protection for postal consumers, in recognition of the fact this is a communications channel so many of us rely on and – on the letters side at least – one where provision is monopolised by a single company in Royal Mail. It sets a minimum standard which consumers should be able to expect from an essential service which lacks market competition.   

The Citizens Advice research aims to set out the consumer perspective on these debates, which is often at risk of being side-lined in these discussions. 

Beth continues: “The ongoing shift towards digital has changed the way many of us interact with post. It has reduced the reliance on letters for digitally engaged consumers. Yet it remains a vital public service for UK citizens in 3 ways. First, even in an increasingly digital world, the majority of UK citizens continue to both send and receive important information via post.
Second, post remains a lifeline for millions of people who are partially or fully digitally excluded. This is particularly important in the UK context where 1 in 5 adults cannot complete a set of 8 basic digital tasks. Third, post is a particularly essential service for people with certain protected characteristics, such as disabled people and people of colour.   

In terms of what Citizens Advice’s research revealed about the USO, Beth explains:

“Some parts of the USO provide patchy protection for consumers and limited incentives for service improvement. There are some failures in the current set-up that need addressing if postal services are to more effectively meet consumer needs. We see ongoing delivery failures with minimal sanctions, there’s limited protection from steep price increases and the current USO isn’t truly universal.” 

 Beth says any changes to the current format of the USO need to do far more to prioritise its purpose of protecting consumers in a monopoly market. At a minimum, the USO needs to guarantee reliability, affordability and universality for consumers.   

Ofcom is inviting views from interested parties by 3 April 2024 on its analysis and the options for reform, to understand the potential impact on people and businesses. This includes vulnerable people, those in rural and remote areas of the UK’s nations, as well as large organisations who use bulk mail services. It will be very interesting to see the results. 

PostEurop’s Botond Szebeny is clear about the importance of flexibility for the USO to ensure its long-term sustainability. He says: “It is important that postal USO regulation is flexible, as the postal industry is very much linked to domestic social, political, geographical and economic conditions. And so national preferences, under the principle of subsidiarity, have to be taken into consideration for example the frequency of delivery. In this way the operators can meet the needs of their specific customers.  At the same time, the overregulation has to be avoided so that postal companies can adapt to the changing world without increasing burden set by new regulations. Moreover, the governments and legislators need to ensure postal operators receive full compensation for the net cost (so-called unfair burden) of the USO.”   

 In conclusion it is clear that postal services will continue to play an integral part in our society and our economy.  As Ofcom’s review proved: 8 in 10 people (79%) say some things will always need to be sent by post. And three quarters of those who use postal services (74%) say they rely on the post for letters. Indeed, Dame Melanie Dawes, Ofcom’s Chief Executive said: “postal workers are part of the fabric of our society and are critical to communities up and down the country.” 

But as Citizens Advice notes: “We need to support people through this digital transformation and not leave anyone behind.” 

And even for the operators dropping the USO like Post Danmark, time will tell if the move is a long-term success. Annemarie Gardshol, Group CEO and President of PostNord commented: “It remains to be seen how customers will react to the new situation and it is therefore too early to say how fast the process will go. We will follow developments closely and continuously analyse their consequences.” The sector will be watching this story closely.  

Read the Ofcom review: bit.ly/3ui6GBE 
Read Citizens Advice report on Future of the USO: bit.ly/3Ss8b9M