UK Royal Mail agrees 1p price rise and new controls

Royal Mail today said that Postcomm had made major changes to its price control proposals and that the company could now agree to an amended three-year control which allows a 1p rise in basic First and Second class stamps to take effect on
May 8.

Consultation on the regulator’s three-year price control package ends at midnight tomorrow and Royal Mail said it still had concerns about the unresolved issues around access pricing, the future regulatory process and protecting the Universal Service in the UK.

However, the revised deal proposes a pricing regime equivalent to RPI-1%, not the RPI-2.5% originally offered. On this basis, and because the flawed average weighted tariff formula has been abandoned, Royal Mail thinks it is reasonable and right for employees and customers for it to accept the proposals and to move forwards as quickly as possible.

Adam Crozier, Royal Mail’s new Chief Executive, said: “After 11 months of detailed discussion with Postcomm we have seen real improvements to the package on the table and we are now able to agree to the new deal. We should now be able to get on and implement the modest 1p rise in postage prices we need.

“The original proposals left a £460m hole in Royal Mail’s finances, rather than the £170m annual benefit from the penny price increase. The control now on the table corrects this.”

The controls proposed allow a 1p rise in basic postage prices and Mr Crozier said he now expected speedy confirmation from Postcomm that the rise can go ahead on May 8.

“Customers will know where they stand – and even with this rise, Royal Mail’s prices will still be among the very lowest in Europe,” said Mr Crozier.