Royal Mail UK drops 'slow and costly' rail deliveries

Royal Mail has dropped the use of railfreight after deciding that the service was too slow and expensive.

The move will cost EWS, Britain’s biggest railfreight company, millions of pounds and strike another blow to the country’s creaking railway network.

The mail operator had already announced plans to abandon the use of EWS to deliver most first-class mail several months ago.

But yesterday talks between the two groups broke down after they failed to agree on the price of using railfreight services for less time-critical mail.

Railways will no longer feature in Royal Mail’s revamped transport strategy, which by the end of the year will combine air and road in what should be a more efficient and flexible distribution network.

Royal Mail is under intense pressure to improve its service and cut costs, having last month reported it was still making annual losses of Pounds 600m.

It has asked EWS to start cancelling its train services straight away, and five out of the 33 distribution routes it operates will stop by the end of July.

Paul Bateson, managing director of Royal Mail’s logistics, said: “There is a marked difference between the price we believe we should be paying for rail services and that which was on the table. Other forms of transport can give us the same benefits but at a lower cost.

“We cannot negotiate any longer. We need to move ahead and create a new distribution network which is more robust.”

On average, Royal Mail delivers 82m items each day – typically two-thirds are second-class and one-third first-class post.

Royal Mail’s decision last year to scale down its use of railfreight for time-critical mail was part of its transport strategy review. The strategy is designed to save Pounds 90m a year, and to improve Royal Mail’s record for first-class deliveries. But EWS’s price demands would have jeopardised the plan.

The operator is in the second year of a three-year restructuring designed to cut annual costs by Pounds 1.4bn. The changes caused a row about the performance of EWS.

The cash-strapped mail operator had planned to switch the movement of most first-class post from rail to roads – using its own 40,000-strong vehicle fleet.

It had said it would use EWS services for second-class items and long-distance, overnight, bulk first-class mail. EWS’s contract with Royal Mail was worth Pounds 65m a year.

This represents 15 per cent of EWS’s 2001 turnover of Pounds 500m, making Royal Mail one of the company’s biggest clients.

EWS was hit badly by disrupted services in the Channel tunnel during invasions of the Frethun terminal in northern France by asylum seekers from the Sangatte refugee centre. The company ran up to 40 per cent of normal service for over a year.