Post Office still needs to deliver improved services;Analysis

The Post Office is said to be the best known brand in the UK after Coca-Cola. It is also the country's biggest retail chain. But it is also an organisation that loses a million items of its customers' business per week; delivers a service at midday – when most recipients have gone to work; does not take credit cards; offers bureaux de change without computer access to exchange rates; and one that many people only visit because they have to.

The Post Office has, by any measure, much to do to catch up with the rest of the world.

And there is little time in which to do it. Postcomm, the regulator, has insisted that competition should dawn, despite the efforts of the Post Office and the Government to resist the substantial reduction of the monopoly that is sought by the European Union.

Postcomm made clear this week that a cut of the monopoly is not the only route to competition. Rival businesses will soon be able to win licences for parts of the Post Office business. The power to grant those licences begins in March when the Post Office becomes a plc, albeit one entirely owned by the Government, and the postal consumers' group gains greater powers.

Already several large businesses have told the regulator they would be interested in moving into the Post Office's territory. Their names are not public but the candidates are many. DHL, TPG – the new name for TNT, and the European privatised post offices spring to mind. Deutsche Post, which owns half of DHL and Securicor, would be in a position to make a strong push. Through both operations it would have a critical mass to deliver rival services. TPG is owned by the Dutch Post Office and Swiss Post is also keen to develop in the UK market. Niche services such as document exchange could be maximised by companies such as Hays, which specialises in document delivery.

The Post Office will complain that it may not be able to meet its now statutory obligation of providing a universal service at a uniform fee if it loses the more lucrative areas of its operations. It would have a point if the only proposition were that profitable sections of the Post Office's operation should be given away to rivals promising to provide a cheaper alternative. But such a crude push towards competition is not likely to be the case. The regulator is understood to be keen on the development of timed deliveries and on niche areas such as document exchange. Rival regional operations are also on the cards. The moves would offer a more sophisticated service.

Given the affection in which the Post Office is held as a national institution and its huge high street presence – it has more than 18,000 branches – it is bewildering that it has not sought to offer more services itself before waiting for the looming encroachment on its business. Instead its lack of enterprise has left it appearing like a rabbit caught in the headlights.

The Post Office has also fallen short on its basic targets. The Post Office Users National Council recently calculated that a million letters go missing a week. This figure was based on a sample range of mail that was perfectly addressed and typed – a category that not all mail falls into. The exercise also had the advantage of knowing that the mail had been sent. Clearly recipients of post do not always know they have been sent items, particularly business and direct mail post.

There has hardly been a time of less optimism about the Post Office's future.

Branch closures have doubled and are now running at nearly 400 a year. There is no sign that this will abate. The future for sub-post offices is uncertain after the Government's decision to pay benefits through bank accounts in a two-year programme starting in 2003. Benefits payments account for more than 40 per cent of many post offices' business. They need to diversify rapidly – as the overall organisation does – but more than 18 months after the Government announced its intention, there is no evidence of this.

The Post Office, where John Roberts is chief executive, and the Government would point to the computerisation of the network as a sign of its modernisation. But in the 21st century, computerisation does not seem a massive achievement. In fact far from it with the Post Office's system. It currently does not have Internet access.

The Post Office has little excuse for struggling in the face of nascent commerciality. One of the last state-owned enterprises, it has seen all other national utilities privatised and has had its own future under Government review for more than ten years.

Despite promises of overhaul, a trip to the cold and miserable surroundings of many post offices reveals a virtual living museum. Perhaps the time has come to change all that – and make good on those promises.