Tag: Royal Mail

Royal Mail to post GBP 2.6bn shortfall by 2010

Posted by | May 21, 2008 | |

Royal Mail will have made GBP 2.6 billion less than expected by the time that its price-control period ends in 2010, the company said yesterday.

The revenue shortfall from the present pricing plan, which controls the price of stamps, among other things, was attributed largely to Postcomm’s estimate in 2006 that the postal market would grow, rather than decline, as it has done.

In evidence to the government-commissioned review into the postal market, Royal Mail backed the initial findings that the “status quo is not tenable”.

Recently, Royal Mail said that it would need a new cash injection soon because of the declining market and escalating pension problems.

Its pension deficit could double to GBP 7 billion shortly and require GBP 1 billion a year in servicing. The postal group recorded a GBP 279 million pre-tax loss last year and operating profits fell 30 per cent to GBP 162 million.

Last week the regulator made a controversial call for private equity to be allowed to buy into the state-owned group — a move attacked as partial privatisation by unions. Last year Royal Mail received a GBP 3.9 billion rescue package from the Government.

The postal group’s evidence to the review said that it “fully recognises the need to accelerate its cultural and operational transformation, to become substantially more customer-focused, and to take costs out ahead of revenue declines”.

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Ecodriving equivalent to taking three million cars off the road (UK)

Posted by | May 21, 2008 | |

A carbon saving equivalent to taking three million cars off the road could be achieved by simply encouraging drivers to shift gear and adopt a more environmentally-aware approach to driving, a new study revealed today.

Despite the potential cash and carbon savings, drivers still lack awareness of environmentally-friendly driving practices, called ecodriving, according to a report by Forum for the Future and commissioned by Royal Mail.

The report, Fuelling Green Driving, reveals that there is still a long way to go to encourage consumers and employers to embrace ecodriving as nearly half the population (43 per cent) don’t know what it is. Furthermore, 32 per cent of people surveyed said they have heard of it, but have never even been tempted to try it.

Recognising the benefits, Royal Mail has launched a company wide awareness programme to help its 180,000 people switch to greener driving, whether for social or work driving. And almost 1,000 Royal Mail drivers have received in-depth classroom training to help them adopt more environmentally-friendly motoring practices with plans to train a further 2,000 in the coming months.

The report highlights that only one per cent of the population has received ecodriving training from an instructor. Moreover, a lack of information is a major barrier to ecodriving as 59 per cent of people require more information about the steps they need to take to encourage them to drive in an environmentally-friendly way. This was particularly prevalent among women where this figure rose to 72 per cent.

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Royal Mail evidence to the independent review of the postal services sector

Posted by | May 20, 2008 | |

Royal Mail has now submitted its second set of evidence to the Independent Review of the UK Postal Services Sector. The company’s submission is outlined in the letter below, which was sent yesterday, along with its evidence, to Richard Hooper CBE at the Review Panel. The Management Summary is also attached.

Dear Richard

We are pleased to submit our second set of evidence for the Independent Review of the UK Postal Services sector. As you know, Royal Mail and its people believe passionately in the one-price-goes anywhere Universal Service at the heart of a vibrant UK postal market – and your review will be central in determining whether it can survive. The Universal Service connects us all together, it creates the opportunity for businesses to connect to each other and to consumers, it allows everyone to participate in the growing internet economy no matter where they are. It is literally part of the social fabric of this country and preserving it is not just an important priority but an essential one.

The Universal Service is, however, now in the red for the first time, having made an estimated loss last year of around GBP 100 million. We therefore wholeheartedly agree with the sentiment expressed in the Review Panel’s first report earlier this month “that the status quo is not tenable”. The Review Panel’s first report makes clear that a key part of the problem is the way in which the industry is regulated: the current regime was designed for a market in which volumes continue to rise yet the reality is that the overall UK postal market is declining, Royal Mail’s ability to compete with other mails operators is severely limited by regulatory constraints, and mail is increasingly competing with other communications media including broadband. It is clear that the postal services industry is not adequately responding to the fundamental market decline as the internet economy grows, and we agree with the Review Panel’s view set out in their interim report, “that the way in which the postal sector is regulated will need to change”.

Our firm belief is that a healthy, efficient and profitable Royal Mail is critically important for the future of the Universal Service and for the industry as a whole. Our Shareholder has given us support and investment over the last few years but we recognise that Royal Mail must do all it can to accelerate its transformation plan and take radical action to modernise and reduce costs in order to underpin the Universal Service in a declining market. As you have already concluded in your initial response, the overriding criterion is to “ensure that a universal service is sustainable” which is underpinned by five criteria:

• A high standard of service for customers
• An appropriate regulatory regime to protect customers where barriers to entry mean that there is limited competition and choice
• A regulatory framework which encourages fair and innovative competition where no barriers exist
• A stable financial future for Royal Mail
• The incentive for Royal Mail to modernise its operation, making it much more efficient, and change its culture

Royal Mail wants to ensure that there is a clear, deliverable and sustainable solution to the issues facing the postal industry and it is our hope that all stakeholders commit to delivering it quickly. Royal Mail believes that the solution has 13 key elements which, if implemented, would secure the Universal Service and help create a vibrant future for postal services within the wider communications market:

1. Royal Mail accelerating the pace of our cultural and operational transformation in a declining market.
2. The Universal Service confirmed as a high-quality, six-day, first and second class service which is geographically uniformly priced with existing high quality of service targets.
3. The Universal Service comprising stamp mail with product and price regulation for stamp and meter mail only to allow Royal Mail to continue to champion

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Postcomm hold open meeting on postal strikes (UK)

Posted by | May 19, 2008 | |

On 14 May, Postcomm held an open meeting ‘After the Postal Strikes’ to hear evidence on Royal Mail’s application for suspension of the ‘c factor’ adjustment (restrictions on the level by which Royal Mail can raise prices if service quality is not met) and the bulk mail compensation scheme, following industrial action last year.

Postwatch presented a number of areas in the application which Postcomm should investigate further, including whether:

– the whole of quarter 3 (from 3 Sept to 2 Dec) should be included in the application.
– recovery periods, following industrial action, within the application are reasonable.
– claims for unofficial industrial action should be included.

Postcomm have invited further written evidence by any interested parties on the impact of industrial action and Royal Mail’s application to be submitted by the end of May.

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Customers ready to pay for first class post (UK)

Posted by | May 19, 2008 | |

Residential customers would rather pay a premium for next-day postal delivery than see standards fall, according to Postwatch.

In its latest evidence to the independent review of the impact of competition on the postal market, the consumer watchdog said users were opposed to any move away from the one-price-goes-anywhere service.

Under the terms of the universal service obligation, Royal Mail has to offer one delivery a day to every address in the UK, six days a week. The way this is paid for became a pressing issue this month when Royal Mail estimated the service made a loss of about GBP 100m last year.

Postwatch chair Millie Banerjee said today: “Postwatch is a keen supporter of a sustainable universal postal service which meets the needs of senders and receivers.

“We are acutely aware that declining mail volumes and the recent announcement by the Royal Mail that the UPS has become loss making gives customers real cause for concern about the future of the service they value.”

Included in Postwatch’s submission are the results of research carried out on its behalf among residential customers, small businesses and bulk mailers.

The research found that while the existing universal service obligation met users’ needs, many said some areas could be improved, including reliability and speed of delivery. Residential customers wanted deliveries six days a week while businesses were unconcerned whether they were made five or six days a week.

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