First Class stamp `could cost 40p' Consignia warns

The price of a first class stamp could rise to as much as 40p if plans to introduce competition to the postal service go ahead, Consignia warned today.

Fierce competition to secure contracts for bulk business mail could hit Consignia’s profits and its ability to deliver personal mail across the country at fixed prices, the company said.

As well as the possible increase in the price of first class stamps from 27p, second class stamps could rise by as much as 11p soaring from 19p to 30p, a spokeswoman said.

Consignia’s concerns were raised after postal regulator Postcomm announced plans to allow competition in the bulk mail market – one of Consignia’s most profitable areas which effectively subsidises its personal mail service.

A Consignia spokeswoman said: “What we’re saying is that if Postcomm allow cherry picking of our most profitable business we will not be able to deliver to everywhere in the country for the same price.

“It would hit the way we currently do our business and our ability to deliver six days a week to 27 million doorsteps around the UK.”

Postcomm told Consignia, formerly the Post Office, that competition could be introduced from April 1 into the bulk mail market.

Looking at a model of how prices went up by as much as 70% in Sweden when competition was introduced, Consignia calculated that increases would also be required in order to continue to run the current service unchanged.

The spokeswoman said that although price increases may be needed, they could only be approved with the regulator’s consent.

Last month Consignia chairman Allan Leighton said the company was losing #1 million a day and faced “death by a thousand cuts” under the plans for competition.

It was already costing 28p to deliver each first-class 27p letter.

Mr Leighton said: “For Consignia the regulator’s approach represents death by a thousand cuts.

“We want to improve our customer service levels, become a great place to work and to be profitable.

“To do this we need to be competitive. Regulation should support a competitive environment, not stifle it.”

The plans would open up 30% of Consignia’s business from April, 60 per cent from 2004 and the entire mail market by 2006.

Postcomm said the best way to improve services and contain costs was for the company to face “real competition.”

Consignia’s claims come as the Communication Workers Union threatens a strike of its 145,000 Royal Mail workers next month over pay.