UK Royal Mail ready to post £500M loss on letters

Royal Mail made a loss of more than pounds 500m last year on letters weighing less than 100g, which includes all first and second class letter post and bulk mail. The loss, which will be revealed when Royal Mail publishes regulated accounts in the next fortnight, could increase pressure for a further rise in the price of a postage stamp. Royal Mail will use the figures in its battle with the regulator, Postcomm, over plans to give rivals access to its local delivery network.

Postcomm has proposed access charges (the price Royal Mail can levy for delivering rivals’ post to the door) as low as 11.5p per item. However, the company says the imposition of such low charges would cost it a further pounds 650m over the next three years.

Although Royal Mail made an overall loss of pounds 611m last year, Postcomm has always argued that the bulk of the losses come in unregulated parts of the business and that the regulated operations are robust.

The overall profit in the regulated business was pounds 80m last year, on sales of pounds 5.5bn. Royal Mail fears that rivals will “cream-skim” the best business and tip the operations into loss. It believes that the new figures in the regulated accounts will put pressure on Postcomm to redraw its proposals. The company says it was promised by Postcomm that the effect of the access charges would be “revenue neutral” and that the new accounts will prove they would not be. A spokesman for Postcomm suggested that the regulator would be unwilling to back down. “We stand by what we say, which is that, overall, the bits we regulate make a profit,” he said. “We calculate that they made a pounds 100m profit on those parts of the business last year.”