Small shops in revolt against UK Post Office

The Post Office was accused yesterday of undermining its own network of sub-post offices with demands for huge levies and restrictions on the services branches can offer.

Convenience store owners, many of which have recently taken over local post office services, said the demands by the state enterprise that they pay large commissions from their other commercial activities to the Post Office were a restrictive practice that could drive many to close the sub-post offices in their shops.

Demands by the Post Office for bigger payments from convenience store owners were also discouraging independent shops and chains of convenience store owners from taking over post office services, depriving many areas of the country of a branch.

Store owners said the move could lead to more closures – beyond the 2,500 already shut down or earmarked for closure – should only a few incentives remain for them to step in and take over the local franchise.

Postwatch, the consumer watchdog, and the industry regulator, Postcomm, highlighted problems with the contract offered by the Post Office in the autumn.

Last month the Association of Convenience Stores complained to the Office of Fair Trading that the new contract offered by the Post Office was an attempt to boost its own profits at their members' expense.

Yesterday MPs joined the clamour for the Post Office to withdraw the demands which they said were a restrictive practice and could undermine the entire network.

Liberal Democrat spokesman Malcolm Bruce said the Post Office was shooting itself in the foot when it demanded high levies on shops, many of which were already operating on low margins.

"It raises the question of whether the Post Office is interested in protecting the network or just wants as much cash as it can grab. It seems to me like a further backdoor closure programme and hang the consequences," he said.

The Post Office triggered a rebellion among convenience store owners following the introduction of a new contract that forces those offering sub-post office services to switch from free cash machines to fee-paying alternatives.

In many cases, the Post Office and its business partner, the cash machine operator Alliance & Leicester, demanded shops charge customers pounds 1.50 a transaction. Between them they take the majority of the revenues.

The move follows a longstanding contractual arrangement that convenience stores hand over 20% of their Lotto takings to the Post Office, whether the sale took place in post office hours or not. The contract also bans convenience stores from offering many other services.

The Association of Convenience Stores, which represents 32,000 shops – more than 10,000 of which include post offices – said it hoped the OFT would support its claim.

The association's chief executive, David Rae, said: "The government and the public at large wishes to see a viable network of post offices serving the community. The contract as it stands undermines the network by giving a disincentive to retailers to incorporate the Post Office in their stores.

"Consumers would benefit from fair remuneration for sub-postmasters and a removal of the restrictions currently imposed on retailers by Post Office Limited."

A spokesman for the Post Office said the decision to switch to fee-paying cash machines would be taken by the supplier, not the Post Office.

However, a convenience store would be in breach of contract if it sacked Alliance & Leicester in favour of another supplier.

He added: "With regard to the levels of commission subpostmasters receive for ATM transactions or lottery sales, these are contractual matters with our partner companies and are commercially confidential."