Rivals call for Royal Mail to slash charges

Royal Mail could be forced by the industry regulator to cut the price of delivering rivals’ letters for the ‘final mile’ a move it claims could be crippling.

At present, Royal Mail charges private competitors 13p a letter to deliver them in the final mile.

Typically, private companies collect mail from large business customers, sort it and take it to Royal Mail sorting offices nearest the postal address for delivery.

But TNT Post, Royal Mail’s biggest competitor, has appealed to Postcomm to force Royal Mail to cut its charges because it says they are so high that competitors are being ‘squeezed out of the market’.

Royal Mail, however, wants the regulator to allow a rise in the 13p charge, saying the fee is too low and preventing it from being able to compete effectively.

Postcomm will examine the rival claims and give a verdict in six months.

But it is already clear that the regulator does not believe that competition is harming Royal Mail and it believes the company is simply trying to protect its monopoly position.

Even though 2.5 billion business letters are being collected by its competitors, the regulator says that the 13p charge for delivering them more than covers Royal Mail’s costs.

Royal Mail says an adverse decision by the regulator could cripple its business, which has already been hit by the ‘loss’ of 2.5 billion business letters, one in eight, to private competition in the past 12 months.

Royal Mail is concerned that this haemorrhage will accelerate as the private postal companies cherry-pick its biggest business customers.

Earlier this month, Postcomm chairman Nigel Stapleton said: ‘Royal Mail is using an attack on the regulatory structure as a smokescreen for its own lack of progress in tackling high labour costs.

‘Since single daily delivery was introduced in 2004, every initiative that the company has taken to improve efficiency has been absorbed either by higher wage rates or increased pension costs.’