Move to ease UK postal price controls
Royal Mail should be allowed to increase the price of a second-class stamp from 24p to 29p by 2010 to help its ‘deteriorating financial position, the postal operator’s regulator proposed on Thursday.
Royal Mail said it would halt moves to modernize the business, including the imposition of later delivery times, while the talks with the unions took place. A GBP 1.2bn loan from the government, Royal Mail’s shareholder, to invest in more modern equipment – at the cost of jobs – remains unused.
But the latest financial data from Royal Mail, highlighted the urgent need for the operator to cut costs and improve its productivity.
Nigel Stapleton, Postcomm’s chairman, warned that “significant concerns” about Royal Mail’s financial position had emerged from an interim review of the 2006-10 price control imposed by the regulator.
Postcomm intended to allow some Royal Mail prices to increase “because its financial position is now weaker than it, and we, had envisaged when the control was finalized in May 2006”, Mr Stapleton said.
Under the proposals, the price of a second-class stamp could increase to 29p by 2010, as opposed to the 26p cap under the original control.
The increase would allow Royal Mail to cut the price of bulk business mail, and other items where it faces direct competition from rivals, to try to staunch its loss of market share.
The sector’s consumer watchdog said it would be asking the regulator to justify the proposed changes. Howard Webber, chief executive of Postwatch, argued: “The priority should not be allowing Royal Mail to impose further inflation-busting price hikes but exploring ways to make efficiency gains.”
Postcomm warned that Royal Mail had “not capitalised on opportunities” in growing areas of the market, such as online orders for packets – a criticism the company flatly rejected. The regulator said Royal Mail was failing to meet its annual 3 per cent target for improving efficiency, achieving only 1.9 per cent for 2006-07 and a forecast 0.6 per cent over the next three years. Royal Mail’s own analysis suggests it achieved gains of 4.6 per cent in 2006-07.
