UK Companies set to benefit from changes early next year
Joe Public is unlikely to see a change in the price of sending a letter as a result of yesterday’s decision. The postmen and women delivering mail will not change either, although much of the post they will be carrying will soon no longer bear the Royal Mail name.
But businesses could benefit from the changes as early as next year if a low access price encourages, as Postcomm predicts, the development of new services and competition over existing ones.
UK Mail plans to offer a guaranteed two-day delivery service to business customers, called Business Class, as soon as the access price comes through. It hopes its share of the market will rise to 3 per cent, which would add Pounds 150m to its turnover.
“This is not first class service, it is not second class service, but it will be pitched to be more competitive than Royal Mail’s first class price,” Paul Carvell, chief executive of Business Post, said.
UK Mail said it would have “to do a lot of work” to get its costs – and therefore the price it charges customers – at the right level. It also expects a struggle with Royal Mail which could delay the implementation of the access price proposals.
But UK Mail said it would be able to lower the price business customers will have to pay to have guaranteed two-day delivery as early as next year.
Other mail operators – including TPG and Hays – are trying to draw valuable business customers away from Royal Mail by competing on price.
But they say the imposition of value added tax on mail services – which they pay but from which Royal Mail is exempt – gives the former national monopoly an unfair advantage which prevents effective competition.
This could change. Representatives from Business Post, TPG and Hays DX met the Competition Authority in Brussels in January to ask for a change in legislation.
The European Commission has sent a draft proposal to repeal Royal Mail’s exemption to the parliament. If passed, it would level the playing field.
Until then, the setting of an access price is the missing link in Postcomm’s attempt to challenge Royal Mail’s monopoly.
Postwatch, the consumer watchdog said: “Access to the Royal Mail pipeline, could in time, grow the size of the overall market – again, good news for customers.”
The regulator has over the past 10 months put in place a new regime of price controls which caps the price of first and second class stamps over the next three years.
In January it increased the reach of many of Royal Mail’s competitors by introducing seven-year licences, in the hope that greater competition would lead to better and cheaper services.
Copyright © 2003: Financial Times Group
