Ofcom published its much-anticipated report this morning (24 January), under the headline ‘Ofcom: Universal postal service must modernise’.
Ofcom set out two primary options for reform:
1. Making changes to existing First and Second Class and business products “so that most letters are delivered through a service taking up to three days or longer, with a next-day service still available for any urgent letters”.
2. Reducing the number of letter delivery days in the service from the current six to five, or even to three. “This would require Government and Parliament to change primary legislation”.
The regulator called for a national debate on the future for the UK’s postal service, against a backdrop where letter volumes have halved since 2011 and parcels – in particular for ecommerce operators – have become increasingly important.
Ofcom has also moved to ensure that the price of Second Class stamps, currently 75p, is capped, and cannot increase by more than CPI inflation from April 2024 to March 2027.
Initial responses to the Ofcom proposals were mixed.
Publishers of time-sensitive weekly magazines that are sent by post to subscribers are likely to be among those most affected by any reduction in service.
PPA CEO Sajeeda Merali commented: “The PPA is closely engaging with this latest Ofcom review. We will continue to call on the government and Ofcom to prevent any moves to reduce the USO as it will directly impact our members.
“The removal of Saturday services will affect time-sensitive titles if Royal Mail can no longer guarantee a timely delivery. These legally mandated services must be maintained so as not to significantly impact a sector worth £3.74 billion to the UK economy. The PPA will represent our members at the highest level of government and Royal Mail to ensure that consumers’ access to time-sensitive information continues.”
Radio Times publisher Immediate Media also expressed concerns. Radio Times has more than 261,000 weekly subscribers, out of a total circulation of 431,080.
Jess Burney, managing director for subscriptions at Immediate Media, said: “We’re hugely concerned about the proposal to remove Saturday deliveries. Radio Times is the UK’s biggest selling weekly subscription magazine and it is really important that the magazine arrives in good time for readers to plan their weekly viewing.
“We have seen a significant reduction in the quality of service in the last few years and we are very worried this will make a difficult situation worse.”
Eight Days a Week Print Solutions managing director Lance Hill has a decades-long career working in direct mail and also spent more than three years working at Royal Mail’s Marketreach wing.
He said he was able to take “a balanced view” based on his experiences.
“I’ve been very vocal about it in front of Royal Mail people and at SMP board meetings. The USO does need overhauling as had needed overhauling for years,” Hill told Printweek.
“If you look at the most popular mail service for volume letters it’s Economy Sort, which has a five day delivery window. When it’s busier it could take up to the full five days, when it’s quieter some of that could drop on day two.”
However, Hill also noted that Royal Mail’s recent poor performance on First Class post was a concern when clients needed important mailings to be delivered as soon as possible, and also flagged concerns that prices could rise even further – which risked pushing clients towards digital channels such as email rather than physical mail.
Last year Royal Mail was fined £5.6m for failing to meet delivery targets – it only delivered 73.7% of First Class mail on time against a target of 93%, while the figure for Second Class was 90.7% compared with the targeted 98.5%.
Speaking to BBC Radio 5 Live this morning, CWU general secretary Dave Ward said the union would consult with the public and business, and produce its own blueprint and vision for the future of the service.
“Can you innovate the services based on the reality that they have the biggest infrastructure that connects people in the UK?” he asked.
“They’ve got the biggest fleet, they’ve got a great workforce that cares about customers and will go the extra mile – surely any company would be wanting to see how you can build on that by introducing new services.”
Ward suggested two potential areas: helping to grow local economies by connecting with businesses, and secondly that posties “could become real servants to the public again in supporting communities, potentially as an access point to the NHS.”
“I want to be clear, the failure of Royal Mail is down to privatisation,” he stated.
“You don’t have to keep accepting this narrative that nothing can be grown in this business.”
Ward also said Ofcom itself should be reviewed after the report was leaked over the weekend.
The Strategic Mailing Partnership (SMP) reacted positively to the findings of the report, “which demonstrate reform is needed”.
Chair Lucy Swanston commented: “The SMP welcomes the review from the regulator Ofcom and the opportunity for discussion around the guidance on routes forward that it has outlined.
“We will, of course, be working and collaborating closely with Royal Mail to ensure the best outcome for the users of mail and for our members in the mail manufacturing community.”
Martin Seidenberg, CEO at Royal Mail parent International Distributions Services has already described the current postal situation as “unsustainable” – with the business now delivering around 7bn letters instead of the 20bn the network was built around.
Royal Mail is also required to deliver to the growing number of UK addresses, which have increased by 4m to around 31m during the past two decades, resulting in extra costs for the postal operator.
Ofcom used similar language, and stated: “The universal postal service risks becoming unsustainable as people send fewer letters and receive more parcels, meaning reform is necessary to secure its long-term future.”
Dame Melanie Dawes, Ofcom CEO, said of the fresh report: “Postal workers are part of the fabric of our society and are critical to communities up and down the country. But we’re sending half as many letters as we did in 2011, and receiving many more parcels. The universal service hasn’t changed since then, it’s getting out of date and will become unsustainable if we don’t take action.
“So we’ve set out options for reform so there can be a national discussion about the future of universal post. In the meantime, we’re making sure prices will remain affordable by capping the price of Second Class stamps.”
Royal Mail is currently loss-making after a turbulent period involving workplace strife and prolonged strike action by CWU members.
Ofcom has estimated that Royal Mail could achieve a net cost saving of £100m-£200m if letter deliveries were reduced to five days; and £400m-£650m if the delivery requirement was reduced to three days.
It said that if the large majority of letters were delivered within three days, it could achieve net cost savings of £150m-£650m.