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Royal Mail could cut postal deliveries to as few as three days a week, as regulator Ofcom set out long-awaited reform proposals that have already attracted fierce opposition from politicians and some businesses.
The regulator on Wednesday laid out options for overhauling the lossmaking service, including the politically contentious move to reduce letter deliveries from six to five, or even three days a week, in a bid to ease financial pressures on the postal provider.
The postal service is “getting out of date and will become unsustainable if we don’t take action”, said Ofcom’s chief executive Melanie Dawes.
Ofcom said that Royal Mail — which reported losses of £169mn in the first half of its financial year — could save up to £650mn if it delivered letters on only three days a week, and £200mn if it scrapped Saturday deliveries.
The shares of International Distributions Services — the parent company of Royal Mail — rose more than 4 per cent on Wednesday, although they were still trading about 50 per cent below their peak in the pandemic.
“The UK business of the Royal Mail [ . . .] has not performed well in living memory,” said Alexander Paterson, analyst at Peel Hunt. “Things that are going to make it easier and reduce their costs are going to be seen as very good news,” he added.
Prime Minister Rishi Sunak earlier this week objected to the idea of scrapping Saturday deliveries, with his spokesperson stating that they “provide flexibility and convenience for businesses”. Downing Street confirmed that Sunak would not rule out legislating to ensure this remained the case.
The option is part of a broader review of the universal service obligation, the Royal Mail’s legal requirement to deliver post across the country six days a week. Scrapping the number of delivery days would require UK ministers and parliament to change primary legislation.
Kevin Hollinrake, postal affairs minister, told the BBC on Wednesday that the government viewed Saturday deliveries as “sacrosanct”. “A six-day service is really important for our citizens as well as businesses that rely on Saturday deliveries.”
Another option set out by Ofcom was to extend first and second-class letter delivery speed to three days or longer, barring a priority next-day service that would come at a higher price. The regulator would not need the government’s approval for this reform.
Royal Mail’s obligations have not changed since 2011 even as the volume of letters sent in the UK has halved over the same period. Meanwhile, parcel delivery has become an increasingly central part of the company’s business.
Royal Mail, which was privatised just over a decade ago, has battled flagging demand for its services, strikes and growing competition from groups such as Amazon.
Some businesses are concerned that eliminating Saturday deliveries would add to a growing list of issues they face, including rising labour costs and weak consumer spending.
“It’s understandable that the overall number of mail volumes has fallen in recent years, but the number of small businesses relying on it has not,” said Tina McKenzie, policy chair at the Federation of Small Businesses. She called for the service to be redesigned “to fit the needs and expectations of today’s culture in a sensible way, that doesn’t leave small firms feeling short-changed”.
Additional reporting by Rafe Uddin.
