UK Royal Mail threatens regulator over price cap

Allan Leighton, the chairman of the Royal Mail, is to seek a judicial review against the postal regulator, Postcomm, if it goes ahead with plans to cap charges that other companies pay to use the postal network. The Royal Mail claims Postcomm’s proposals would cost it up to pounds 1.2bn. This would more than wipe out gains from a 1p rise in the price of first and second class stamps, agreed last week. Leighton is said to regard that agreement as a victory for the loss-making group. He had considered taking Postcomm to the Competition Commission rather than accept conditions (later watered down) that, he argued, could have cost the company pounds 460m. According to one Royal Mail executive: “Having agreed on pricing of first and second class post we have more scope and less financial risk, which make it easier for Allan to go to judicial review on access charges to the network.” Royal Mail’s rivals want to collect post from customers, bring it to the group’s sorting centres and then use Royal Mail postmen to deliver to the destination. Under Postcomm’s current thinking Leighton would be able to charge 14p per item, compared with the 20p he deems a fair price. The group is also worried existing bulk mail rivals will try to use the network at the same low rate as new entrants to the market. Leighton is thought to have told Postcomm he would be willing to revisit access charges once he has reduced the company’s cost base. The Royal Mail had been expected to make a full-year loss of pounds 500m. But this is thought to have been halved after Leighton started a major cost-cutting plan.