Regulator questions service cost analysis

Consignia found itself at odds with regulator Postcomm last night after publishing comparisons of its delivery times and costs with those elsewhere in Europe, writes Geoff Gibbs

The company soon to be known as Royal Mail is in the process of negotiating a 1p rise in first and second class postal charges in an attempt to secure a much-needed pounds 170m-a-year boost in revenue.

Stamp prices have fallen in real terms over the last five years and are said by the company to be among the lowest in Europe. But Postcomm yesterday accused Consignia of failing to compare like with like when it suggested that next-day delivery costs in Germany, for instance, amounted to 101p compared with 27p in the UK.

First class postage in Britain was raised from 26p more than two years ago and second class has not gone up for six years.

Consignia, which handles about 82m letters a day, says it would be pounds 500m a year better off in revenue terms if stamp prices had kept pace with inflation. Linked rises would have taken first class to 30p and second class to 23p.

Postcomm made it clear that the losses announced by Consignia would not make it rethink its timetable for opening the market to competition. It said it had been aware of the extent of the company’s troubles when it decided last month to extend the deadline until 2007.

Consignia, which estimates it could lose 30% of its market share when the full effects of competition have worked through, reiterated that it had no objection to an opening up of the market at the right pace. But directors said they were not prepared to open it up at a loss.

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