UK Royal Mail fined GBP11.7m over missing post

The Royal Mail was hit by a huge £11.7 million fine today over the loss or late delivery of millions of letters.

The financial penalty, on top of a previous fine of £7.5 million, was imposed by the industry's regulator Postcomm, which accused the postal group of “serious breaches” of its licence obligations.

Consumer group Postwatch said it supported the “tough stance” taken against the Royal Mail, but maintained that the fine should have been higher.

The Royal Mail announced that it would appeal against the fine, which it described as “unfair.”

Postcomm said it had uncovered some “serious” shortcomings during 2004/05, when 14.6 million letters, packets and parcels were lost, stolen, damaged or interfered with.

Chairman Nigel Stapleton said: “Customers are entitled to expect that when they post mail, it will reach its destination.

“Royal Mail is a large and highly decentralised organisation and it is essential there are controls in place to ensure that procedures for protecting mail are being followed across the company.”

Postcomm carried out a review which it said found that some important features of Royal Mail's procedures were not being applied across the business.

The most significant weakness was said to be the “poor management” of the recruitment and training of agency staff.

The fine represented around 2% of the Royal Mail's operating profit last year, said Postcomm, and included a penalty of £271,000 for poor delivery across three London postcode areas – SE, WC and E – where two million letters were delivered late during 2004/5.

Postcomm said the Royal Mail appeared to have improved its performance “substantially” as a result of its review but the regulator added that it could not ignore the “serious failures” to observe important parts of its licence obligations.

“Although Postcomm has observed significant efforts by Royal Mail to improve since our review was completed in May 2005, the fact remains that these shortcomings existed over a prolonged period.

“The level of this proposed financial penalty reflects the Commission's view of the extent and seriousness of the licence breaches.

“I should stress that these are mainly management failings and do not reflect on the dedication and commitment of postmen and postwomen,” added Mr Stapleton.

The Royal Mail said the scale of the fine was “unfair”, adding that millions of pounds had already been paid in compensation to domestic and business customers for a dip in the quality of service covering the time of the Postcomm review.

“The fine simply diverts money that could otherwise have been invested in customer service to Treasury coffers, with no benefit whatsoever for customers,” the organisation said.

“Royal Mail will do everything in its power to appeal the unreasonable size of the fine.

“The company is currently providing the best quality of service in its history, and the vast bulk of mail arrives safely and on time.

“Postcomm's report concentrates on events that occurred up to two years ago when Royal Mail was going through massive operational change.”

A spokesman said the amount of lost mail had halved over the last three years, with an estimated 99.93% of the 22 billion letters sent in the UK arriving safely.

Last year the amount of mail stolen was around 0.006% of the annual mailbag, with 80% of the stolen mail taken by criminals targeting Royal Mail vans, stealing bags of mail and attacking postmen and women.

The Royal Mail said it estimated that around 200,000 items, or 0.001% of the 22 billion handled annually, were stolen by employees.

The number of casual postal workers has been reduced from more than 25,000 in 2003 to fewer than 1,000 today.

Consumer group Postwatch said it supported the “tough stance” taken against the Royal Mail, but added that the fine should have been higher.

Chairwoman Millie Banerjee said: “To send a clear message to Royal Mail, the UK's universal service provider, we believe that Postcomm should have proposed a financial penalty equivalent to 5% of last year's operating profit – £26.85 million.

“Postcomm's proposed fine of £11.38 million represents just over 2% of operating profit.

“Customers throughout the UK will be pleased that action is being taken to help restore the integrity of the postal service.

“I am delighted Postcomm commissioners are taking decisive action, after a thorough investigation, in support of customers' interests. Tough action is necessary and it would have played to Royal Mail's complacency not to impose a penalty.

“The fact is, letters are still being lost daily. Some are stolen, many are misdelivered. Customers are increasingly worried that organised criminals are able to use stolen mail to perpetrate identity theft.”