Small UK businesses to benefit from postage discount

Royal Mail is planning to give small business customers a 1p discount off new stamp prices next April if they use franking machines, the company announced today. It is also proposed that business customers who send their mail in envelopes carrying a pre-paid postage indicia – a Printed Postage Impression (PPI) – will get the same 1p discount from April 2005.

Adam Crozier, Royal Mail’s Chief Executive, said: “These discounts will help a great many of our customers, especially small to medium-sized businesses, who frank their mail or prepay their postage. It costs us less to collect and sort such mail and we therefore believe that customers using these services should enjoy a discount on postage prices.

The 1p discount off the price of a stamp for meter and PPI mail is a step towards bringing Royal Mail’s prices – the lowest in Europe – more in line with the actual costs of handling and delivering the mail.

“All mail carrying stamps loses money for Royal Mail with the average loss on a First Class letter of 5p, and the average for a Second Class letter of 9p. Overall, stamped mail incurred a loss of £247 million in the last financial year,” said Mr Crozier.

The losses reflect the fact that Royal Mail has costs in designing and printing stamps, operating a retail network of around 15,500 Post Office® branches and selling stamps through 55,000 other outlets, as well as a collection service from the 115,000 post boxes nationwide. In contrast, meter and PPI mail does not incur Royal Mail stamp production or retailing costs, and not all meter and PPI mail is posted by customers in post boxes.

Currently meter mail and PPI customers pay full stamp prices and receive no discount.

The 1p discount will come into effect in April when there will be a series of price changes, and some will go up and some will go down. Final decisions on new prices have not yet been taken but will be announced three months before 1 April. Under the RPI-1% price control on Royal Mail, and with the RPI currently running at around 3%, Royal Mail’s overall prices will again fall in real terms as they did this current financial year.

Ends

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Notes to Editors
1. Royal Mail’s prices are falling in real terms as a result of a price cap of RPI-1%. The basic 28p First Class stamp is some 4.7% lower in real terms compared to five years ago.
2. Royal Mail stamp prices beat the rest of Europe in terms of value-for-money. For a 60g letter, Royal Mail’s 28p First Class price compares with 45p in Spain, 78p in France, 79p in the Netherlands, 94p in Germany and 112p in Italy.
3. There are 210,000 customers using franking machines.