Rival postal operators eat into Royal Mail profit

When Royal Mail blamed its first operating loss in six years on increased competition, eyebrows were raised across the industry.

But new figures from Postcomm reveal that the 15 alternative licensed postal operators are clawing their way deeper into Royal Mail territory.

End-to-end delivery is still largely unfeasible for most of the newer service providers, with only 1 per cent of mail currently not handled by Royal Mail. However, according to Postcomm’s latest figures, access volumes have gone from 2.4 billion items at the end of the last financial year, to 4 billion between April and August. This now accounts for one in five items of business mail.

And with GBP 700m a year being earmarked for Royal Mail’s troubled pension scheme, and the fact that bulk business volumes are down 12 per cent, Royal Mail’s predicament starts to look pretty sticky.

But not all Royal Mail customers are willing to lend a sympathetic ear. Stephen Bentley, chief executive of response management and fulfilment house Granby Marketing Services, believes that Royal Mail’s troubles are due to a failure to keep costs under control. He is nervous the only way for Royal Mail to recover financially will be to increase prices.

“We’ve lost GBP 44 m this year on access mail that we’re handling on behalf of competitors,” says Budd. “The reality is that we are subsidising their businesses.”

But other parts of the business are looking up. In the first half of last year the regulatory report figures show that Royal Mail made a profit on first class mail, including franked mail.

Andy Fruin, external relations director at Postwatch, does not believe Royal Mail’s future is terminal. He concludes/ “Royal Mail has gone through a dramatic recovery before, and it will become a healthy company again.”