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Royal Mail could cut second class deliveries on Saturdays following Ofcom proposal
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Ofcom has today proposed changes to the obligations on Royal Mail with the aim of putting the universal service on a more sustainable footing.
Natalie Black, Ofcom’s Group Director for Networks and Communications, said: “The world has changed – we’re sending a third of the letters we were 20 years ago. We need to reform the postal service to protect its future and ensure it delivers for the whole of the UK.
“But we’re safeguarding what matters most to people – First Class mail six days a week at the same price throughout the UK, and a price cap on Second Class stamps.”
“Our proposal was developed after speaking to thousands of people across the country and is designed to preserve what matters most for our customers – maintaining a one-price-goes-anywhere service to 32 million UK addresses and First Class deliveries six days a week.
“As Ofcom’s analysis shows, it is no longer financially sustainable to maintain a network built for 20 billion letters when we are now only delivering 6.7 billion. Reform is crucial to support a modern, sustainable, and reliable postal service for our customers, our company and our people.”
Tom MacInnes, Director of Policy at Citizens Advice, said: “Year after year, Royal Mail’s failure to meet its targets with minimal consequences demonstrates that the current Universal Service Obligation (USO) is not effectively protecting consumers.
“Reforms to the USO come at a critical moment for the future of our postal service and we’re pleased that Ofcom has taken an interest in the issues, like reliability and affordability, that matter most to consumers.
“But cutting services won’t automatically make letter deliveries more reliable or improve standards. And neither will reducing delivery targets for Royal Mail when it has repeatedly failed to hit them for so many years.
“While Ofcom has acknowledged some of Royal Mail’s failings by imposing fines, we want to see the regulator clamp down much more consistently on breaches of any new rules in the future. Only then will we have a USO that puts consumers at its heart – not just Royal Mail’s bottom line.”
Why reform is needed
While many people still rely on post, the way they use it has changed dramatically. Twenty years ago, Royal Mail was delivering 20 billion letters. That number is now 6.6 billion a year, and Royal Mail expects it to be 4 billion a year in the next few years.
Declining volumes have driven up the average cost of delivering a letter – as postal workers are walking more routes than ever, but delivering far fewer letters, the company has been losing hundreds of millions of pounds.
If the universal service does not evolve to align with customer needs, it risks becoming unsustainable, and people could end up paying higher prices than necessary. The UK is not alone in needing to respond to this challenge. Countries around the world are reforming their universal service obligations.
Protecting what matters most
Ofcom research suggests that affordability and reliability are now more important to people than speed of delivery.
People have told Ofcom that most letters are not urgent. However, eight in ten (78%) value having a next-day service available for when they need to send the occasional urgent item, and a similar proportion (82%) value being able to send something for the same price anywhere in the UK.
On average, UK households spend just 60p per week on postal services – 0.11% of their weekly outgoings. However, nine in ten (90%) say it is important to have an affordable option available.
So, Ofcom is protecting what matters most to people, and keeping the following unchanged:
- continuing to cap the price of a Second Class stamp;
- one price goes anywhere throughout the UK; and
- six days a week First Class next-day service.
Second Class delivery changes
In Ofcom’s latest in-depth research, most postal users said they do not need six days a week delivery for the majority of letters.
To ensure the universal service remains sustainable and delivers what people need, Ofcom is proposing to allow Royal Mail to deliver Second Class letters on alternate weekdays – still within three working days of collection – but not on Saturdays.
Ofcom has assessed postal users’ needs and provisionally concluded that the proposed new service would continue to meet them. Indeed, only 4% of users think they would be very significantly impacted by the proposed changes.
Ofcom estimates this change would enable Royal Mail to realise annual net cost savings of between £250m and £425m with successful implementation. This could enable it to improve reliability and redeploy existing resources to growth areas such as parcels.
However, reforming these obligations is unlikely to be enough on its own to secure the longer-term financial sustainability of universal service. Royal Mail must invest in its network, become more efficient and improve its service levels in both parcels and letters.
Quality of service
In recent years, Royal Mail’s delivery performance has not been good enough. In the last 18 months, Ofcom has fined the company more than £16m, and says it will continue to hold it to account.
However, given the postal market has changed significantly since Royal Mail’s delivery standards were set two decades ago, Ofcom believes it is right to re-assess these targets with the future in mind, as has been done in many other countries already.
The UK has more stretching targets than comparable European countries. Maintaining the current higher standards would carry higher costs which would need to be recovered through higher prices. Research indicates that people are more willing to accept a reduced quality of service than price rises to pay for investment in higher quality.
Ofcom is proposing two sets of changes to Royal Mail’s delivery targets:
- Small changes to the primary targets – for First Class mail from 93% to 90% delivered next-day, and for Second Class mail from 98.5% to 95% delivered within three days.
The proposed new targets would remain high by international standards. For example, Germany’s three-day target is 95%, Spain’s is 93%, and Norway’s and Poland’s are 85%. In Ofcom’s 2020 review of postal users’ needs, it found that a reduction to 90% would meet 97% of people’s needs, compared to 98% that are met by the current targets.
- New backstop targets would ensure that, even if letters miss the primary target, consumers have confidence that they will arrive in a reasonable period of time. For First Class mail, 99.5% would have to be delivered within three days of posting. For Second Class mail, 99.5% would have to be delivered within five days of posting.
These new targets address the issue many people have experienced where letters have taken weeks to arrive. Many other countries have introduced secondary targets like this.
Have your say
Anyone can respond to Ofcom’s consultation – the deadline is 10 April 2025, and Ocom plans to publish its decision in the summer, after carefully considering feedback received.