Royal Mail shake-up: What it could mean for YOUR deliveries… and will price of stamps go up?

Royal Mail could cut letter deliveries from six days to five days, or even three days a week, under new proposals outlined by Ofcom.

The company has long campaigned for its universal service obligation (USO) – which requires it to deliver letters six days a week to every address in the UK – to be relaxed.

Now the regulator has taken steps that could pave the way for the biggest shake-up to the postal system in years.

Ofcom said Royal Mail could make significant savings – up to £200million – by cutting its delivery days from six to five days a week. It could save as much as £650 million if it moved to three days.

Royal fail: Postal firm has failed to meet its delivery targets and has blamed the USO 

It has also proposed changes to the first and second class system, with ‘most letters’ delivered through a ‘slower service’ taking up to three days or longer, and a next-day service for urgent letters.

If the plans are given the green light, how much disruption would this bring to deliveries and will prices continue to rise?

Why does Royal Mail want to scrap Saturday post?

Earlier this month, Royal Mail boss Martin Seidenberg declared the universal service is ‘simply not sustainable‘.

It follows years of campaigning by the company to relax the current rules, as the number of letters delivered continues to dwindle and customer habits have changed.

The volume of letters halved from 14.3 billion in 2011/12 to 7.3billion in 2022/23. At the same time parcel volumes have increased from 2.6 billion in 2018/19 to 3.6 billion in 2022/23.

Seidenberg, who became CEO last August, has called on the Government and Ofcom to help it adapt to these structural changes and the rise of rival delivery firms like Evri and Yodel.

At the same time, Royal Mail has come under fire for failing to meet its delivery targets from customers and the regulator, which handed the firm a £5.6million fine at the end of 2023.

This Is Money has heard from readers across the country who have been waiting on post, only to find it has either gone missing or turned up weeks later.

Royal Mail might be campaigning for a relaxation of the USO in a bid to improve its service, but it is facing pushback.

A spokesperson for the Communication Workers Union, which represents postal workers, said: ‘In the ongoing debate, Ofcom now have no credibility whatsoever, and their views are an irrelevance to the discussion that must take place between postal workers, businesses and customers.

‘We are not resistant to change, but we will not sign up to a three-day USO, which would destroy Royal Mail as we know and would impact on thousands of jobs.’

The Prime Minister has also indicated his opposition to plans to scrap Saturday letter deliveries, saying he ‘would not countenance’ enabling Royal Mail to ditch its USO.

Will stamp prices continue to rise?

Royal Mail hiked the price of first class stamps twice last year, blaming cost pressures

Last April, Royal Mail hiked the price of first class stamps from 95p to £1.10, while second class stamps rose by 10 per cent, from 68p to 75p.

It took the unusual step of announcing further price increases in October, increasing standard first-class stamps from £1.10 to £1.25. Second-class stamps remained at 75p.

Nearly all – 91 per cent – of those surveyed by Ofcom said affordability was the most important consideration when it came to posting letters. So what would relaxing Royal Mail’s duties mean for prices?

Royal Mail has blamed the price hikes on increasing cost pressures and its USO, and the regulator seems to support this.

Ofcom’s report said: ‘The consequence of a letters USO that does not align with people’s needs is that people could pay higher prices than necessary.

‘It also makes it harder and more expensive for Royal Mail to provide a reliable service, and to invest and restructure its network to respond to what people place higher value on – reliability in letters and more service options in parcels.’

Ofcom added: ‘It is important to note that the labour costs which arise from the delivery of letters do not fall easily in line with volumes. 

> How much have first and second class stamps risen in price since 1980? 

‘For example, the cost of a Royal Mail postal worker delivering to a single property is largely the same when delivering two letters as it is when delivering one letter, and at present the nature of the USO requires a postal worker to pass (almost) every single property whether or not there is a letter to deliver.

‘As a result, it is difficult to reduce costs as volumes and revenues fall regardless of economic incentives to achieve efficiency savings.’

This suggests that a reduction in letter delivery days could cut costs, but there is no guarantee this would go on any meaningful change to stamp prices, and rather be invested in logistics. 

Since 1980, Royal Mail has not once cut the price of first or second class stamps, but with concerns it could further hike prices to as much as 94p for second-class postage, keeping prices at their current level would likely be welcomed.

Another part of Ofcom’s remit is to consider whether stamp prices should be capped, and last set the figures in 2019.

The good news for Royal Mail customers is that Ofcom confirmed it would retain the ‘safeguard cap’ on second class letters.

These prices can rise by no more than CPI inflation from today’s prices, until March 2027.

It said: ‘Royal Mail continues to be the UK’s only door-to-door deliverer of letters on a national scale. This means we cannot rely on competition to ensure prices remain affordable.’

Could Royal Mail’s service improve with a 5-day week?

While Royal Mail has hiked prices, its letter delivery performance has floundered, culminating in a £5.6million fine from Ofcom for failing to meet its targets.

Under Ofcom’s rules, Royal Mail is required to deliver 93 per cent of first-class mail within a working day and 98.5 per cent of second-class mail within three working days.

In 2022/23, Royal Mail delivered just 73.7 per cent of first-class mail on time, and 90.7 per cent of second-class mail on time.

There are no signs that the service is improving, either. Figures show that in the second quarter of 2023/24, it delivered 74.1 per cent of first-class and 91.3 per cent of second-class post.

Rules: Royal Mail is required to deliver 93% of first-class mail within a working day

Changes to the USO would change the speed at which letters were delivered, although Ofcom’s survey suggests consumers are more concerned about the reliability of its service than speed.

This Is Money’s investigation found readers across the country were receiving post in large bundles that were weeks late, with some receiving post less than once a week.

Morgan Wild, interim director of policy at Citizens Advice, said: ‘Given Royal Mail has failed to meet its targets for nearly half a decade, it’s clear the current Universal Service Obligation is falling short of its fundamental purpose: safeguarding consumers. Any changes must prioritise their needs, not Royal Mail’s bottom line.

‘We agree that improving reliability is essential. Late post has real consequences – people miss vital medical appointments, legal documents and benefit decisions.

‘Cutting services won’t automatically make letter deliveries more reliable, so we must see proposals to tackle the cause of Royal Mail’s persistent failings. Ofcom and the Government have to spell out how any revised USO will start to deliver for the millions of us who rely on it.’

Any major changes made to current service levels are also likely to anger unions, which could lead to further disruption to letter deliveries.

However, Ofcom has suggested that if significant changes were made to the USO, it may need to adapt its Quality of Service requirements.

It said: ‘Many countries have required their [postal firms] to adhere to higher QOS standards when reducing delivery speed and/or frequency, with many pointing to research that consumers prioritise reliability of letters services over speed of arrival,’ it said.

However, given that Royal Mail has failed to meet its delivery targets at current levels, there is no guarantee it will meet these higher standards.

This post first appeared on Dailymail.co.uk