UK postal market will open a year early

The postal market is to be fully liberalised from the start of next year, more than a year earlier than planned, in an effort to force Royal Mail to improve its customer service.

Postcomm, the postal regulator, said yesterday that any licensed company would be allowed to operate in the mail market from January 1 next year. Royal Mail currently has a market share of 99 per cent.

The market was to be opened in April 2007, but last September the regulator indicated this would be brought forward. The country’s parcel delivery market is already fully liberalised.

Nigel Stapleton, chairman of Postcomm, said that, unlike other market liberalisations, the process was not about bringing prices down as stamps were already cheaper in the UK than in many other countries.

“The major change is going to be the service provided by the incumbent operator,” he said. “Royal Mail is already placing more emphasis on quality of service because of competition.”

The Communication Workers’ Union called the move “a grave mistake”. The UK should not open its postal market until other European countries did the same, it said.

Companies including Business Post, Express Dairies and Deutsche Post of Germany already operate in the UK, but Postcomm’s rules limit their activities to bulk business mail in batches of at least 4,000 letters. From next year licensed operators can target a wider range of customers and offer more services, such as setting up dedicated collection boxes and delivering mail within specific areas.

Postcomm yesterday granted a long-term postal licence to Mail Plus, owned by La Poste of France. But other companies may wait until various issues are resolved before entering the UK market. Royal Mail does not have to charge customers value added tax, for example, giving it a price advantage over competitors. And Postcomm has yet to set the operating terms for the open market, such as rules on handling returned-to-sender mail and safeguards for postal security.

In the 2003-04 financial year, state-owned Royal Mail missed all 15 targets for postal reliability set by Postcomm. The group blamed the poor service on the restructuring of its delivery network, as well as a series of wildcat strikes by postal workers at the end of 2003.

This week, Royal Mail said service had improved from the middle of last year, and 91.9 per cent of first class letters were delivered the next day between July and September, just short of the 92.5 per cent target.

Royal Mail has asked for more freedom to set stamp prices in return for letting in competitors. The group is campaigning for a move to prices based on the size, rather than the weight, of items, which it says is more reflective of handling costs.

Following several years of losses, Royal Mail is now making a profit and Postcomm said it was confident the group could survive in a more competitive landscape.