Tag: Royal Mail

Rivals call for Royal Mail to slash charges

Posted by | Mar 25, 2007 | |

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.’

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Royal Mail demands to charge rivals more

Posted by | Mar 23, 2007 | |

The battle between Royal Mail and one of its leading competitors in the UK letters market, TNT Post, intensified yesterday with each side making conflicting demands for changes to the way prices are controlled.
At the heart of the struggle is the issue of how much Royal Mail can charge competitors for delivering mail those competitors have collected. Royal Mail argues that it needs to be allowed to charge more to compete in the key business mail market. It says the existing price structure “simply isn’t working”.
TNT Post claims the state-owned company already charges too much and allowing Royal Mail to increase its wholesale price would squeeze out competition.
Under current rules Royal Mail has to allow outside access to its network, with its own postmen and women delivering letters collected by competitors. It is allowed to charge around 13p for each letter handled under the access agreements.
The access price is crucial for both sides in the battle for the business mail market, where a relatively small number of customers account for a high proportion of the UK’s mail. Rivals to Royal Mail that have entered the market since it opened up at the beginning of last year see the sector as their best chance of winning business. They can collect bulk mail from business customers, pre-sort it, and then use Royal Mail to take it the “final mile”, without having to set up their own delivery networks. The amount Royal Mail can charge for this service is key to competitive pricing.

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Postcomm welcomes progress on VAT for postal services

Posted by | Mar 23, 2007 | |

Postcomm has welcomed the announcement earlier this week of a new type of access arrangement, designed to allow VAT-exempt organisations, including financial institutions and some charities, to take better advantage of the choices available in the newly-competitive mail market.

Under the new arrangements, mail operators offering access will no longer be required to charge VAT on the whole cost of their access schemes. Instead, VAT is only required to be charged on the ‘upstream’ element of these arrangements – that is, the collection and sorting services offered by Royal Mail’s competitors.

The ‘downstream’ element – delivery – is provided on competitors’ behalf by Royal Mail, which is itself exempt from charging VAT on the services it supplies to customers.

Until now, VAT was required to be charged on the full cost of access arrangements with licensed operators. Non-exempt organisations have been able to offset that cost against their own VAT payments. But VAT-exempt organisations have not, making access arrangements – and the services offered by Royal Mail’s competitors – more expensive, in practice, for them.

Although Postcomm has welcomed today’s announcement, it remains concerned that there is not a ‘level playing field’ for licensed postal operators: Royal Mail is exempt from charging VAT, while other operators are required to charge the full 17.5%, making it harder for them to compete on cost for the business of VAT-exempt mailers. This is a significant barrier to postal market entry for new operators, particularly end-to-end operators, who make their own deliveries, and whose VAT liability remains unchanged.

Postcomm’s preferred solution would be a reduced, uniform rate of VAT, to be applied to all postal operators, including Royal Mail. For example, a 5% rate applied across the board would create a level playing field without resulting in significant price rises for customers.

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Postcomm launches review of Royal Mail's charges for 'final-mile' delivery

Posted by | Mar 23, 2007 | |

Postcomm, the UK postal services regulator, has launched a review of the charges Royal Mail imposes on other operators for access to its network and the delivery of mail over the so-called ‘final mile’.

Royal Mail and its biggest private competitor, TNT Post, have both requested changes to the margin between the price Royal Mail charges its customers for bulk mail deliveries and the amount it charges other operators for end delivery.

The former monopoly provider wants the margin narrowed, saying the 13 pence per item it is allowed to charge its competitors for providing final-mile delivery to homes and businesses is not enough to cover its costs.

It added it cannot compete fairly in the business mail market under the current price controls because any cut in its prices must be matched by a reduction in the amount it charges its rivals to use its network.

Competition is developing at a much faster pace than originally predicted, according to Royal Mail, with new entrants such as TNT Post and DHL securing about 25 pct of the bulk business mail market since it was opened on 1 January 2006.

TNT Post, however, said Royal Mail was attempting to ‘squeeze its competitors out of the market’ by requesting a reduction in the margin.

TNT Post said the limited margin protection currently in place made it difficult to invest in the infrastructure required to compete with Royal Mail.

Royal Mail has also called for an end of the cross-subsidy of stamped letters by business mail.

Stamp prices need to rise by 6 pence to a level that can realistically fund the Universal Service, which lost more than 200 mln stg in the last financial year, it said.

‘Because stamped mail is subsidised by business mail our business mail prices remain artificially high, which makes it easier for rivals to ‘cherry pick’ business customers,’ it said.

The review of Royal Mail’s pricing and service quality levels until 2010 will be completed within six months, Postcomm said.

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Royal Mail and Remploy pilot scheme for disabled workers

Posted by | Mar 23, 2007 | |

A partnership between Royal Mail and Remploy – the provider of employment services for disabled people – is set for a national roll-out following a successful pilot programme in the South East.

Over the past year, 32 Remploy candidates with disabilities or health conditions have been employed as postal workers. Eleven are based at the Jubilee Mail Centre in Hounslow, while candidates have also been placed into administration, sorting office and delivery roles.

The scheme is now being extended to Essex, Chelmsford, Chiswick and Guildford, prior to a national roll-out in April.

Mike O’Donovan, mail centre manager at the Jubilee Mail Centre, said: “Many people’s perceptions of disability have been turned around by working with Remploy and it’s great to know that the partnership will now be rolled out nationally.”

This year, Remploy aims to find 5,600 jobs for people with disabilities and health conditions in mainstream employment.

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