Business

Postal liberalisation is making no difference to SMEs, but is putting Royal Mail in financial peril, a new report has claimed.

The report was commissioned by the government to examine the effects of the liberalisation of the postal market. It said that, while there is competition in the bulk mail market, there have been “no significant benefits” to smaller businesses and domestic consumers in the two years since the end of Royal Mail’s monopoly.

It also raised questions over the future financial viability of Royal Mail, reporting that in 2007/08 it will make its first loss across its services.

“Royal Mail is limited in the way it can access capital. Industrial action and a £3.4bn pension deficit – one of the largest in the UK – also pose constraints. Changes in the market and competition have arrived at a testing time,” the report said.

“There is now a substantial threat to Royal Mail’s financial stability and, therefore, the universal service. We have come to the conclusion, based on evidence submitted so far, that the status quo is not tenable. It will not deliver our shared vision for the postal sector.”

The report comes as Royal Mail seeks a judicial review of Postcomm’s decision to deny it the right to introduce zonal pricing.