Here’s the truth – we send far fewer letters than we used to. Electronic communication is faster, cheaper and (much) more reliable.
It is against this backdrop that the watchdog Ofcom kicked off a “national debate” on the future of the Royal Mail’s universal service obligation (USO) at the beginning of the year. It now seems minded to accept the latter’s proposals for reforms.
These would see second-class deliveries every other day with nothing on Saturday. There would still be a next-day delivery service for those paying for first class, including Saturdays.
This was always coming. Martin Seidenberg, the boss of Mail owner International Distribution Services, puts the number of letters posted at 6.7 billion a year compared with the peak of 20 billion. The company also says it lost nearly £350m on providing the universal service in its last financial year.
There will always be some who jump up and down and angrily oppose any reforms. However, those losses are unsustainable and they will only grow as the number of letters delivered continues to decline.
The Mail’s proposals are by no means pain free and will likely involve a significant number of job losses. However, the alternative to the plan on the table is that the thing goes belly up in a few years resulting in many more job losses and an appreciably worse “rump” service in the end.
Ofcom, in announcing its favoured way forward, cited research showing that the public “recognised that the way people and businesses use letters has changed, and acknowledged that changes to the obligations on Royal Mail will be required if we are to ensure the service remains sustainable, affordable and reliable”.
This isn’t surprising. The numbers are the numbers and most people can see the writing that has long been on the wall. That change was coming is a statement of the bleedin’ obvious.
All this holds true regardless of how the current uncertainty over the ownership of the business is ultimately resolved. A £3.75bn takeover by the Czech billionaire Daniel Křetínský has been called in by the government, which is in the process of running the slide rule over any potential national security implications. Among the binding commitments made by Křetínský’s EP group is maintaining the delivery of first-class post six days a week, and keeping the headquarters of the business in the UK for at least five years.
Ofcom also said it found “strong support for maintaining the fundamental principles of universality, affordability and uniform pricing”. So that will be the priority when change comes. This won’t be soon. The proposals will go out for further consultations and we are unlikely to see the final decision until next summer.
At this point, I would gently suggest that Ofcom puts its skates on. If we’re agreed change is necessary and inevitable, then it would be better for it to be enacted sooner rather than later.
On the other hand, these proposals offer Royal Mail – and ultimately Mr Křetínský if his takeover is allowed – a substantial financial win. It will be several hundred million pounds to the good if they go ahead. This comes when Royal Mail’s service has been looking decidedly spotty. Last year, Ofcom fined the company £5.6m for failing to meet its first and second-class delivery targets in 2022/23 and in May another investigation was opened into the company’s failure to meet its delivery targets for 2023/24.
Given that the Mail’s savings could hit £600m by some estimates, there has to be a quid pro quo for the consumer. This is a company that needs to up its game, and considerably so. Any future financial penalties if it fails to do that should be reflective of that and the savings on offer.