Yahoo Finance Blow for Royal Mail as Government blocks plan to scrap Saturday deliveries
Royal Mail’s plans to axe Saturday letter deliveries has been blocked by the Government, in a move that could lead to a huge rise in the price of first class stamps.
Business minister Kevin Hollinrake today confirmed that ministers would not bow to the demands of the former FTSE 100 company, which has argued its business is unsustainable unless it is allowed to drop its six-day-a-week delivery obligation.
Mr Hollinrake said in a letter to the Business Select Committee: “The ability to send and receive letters and parcels is important both socially and economically. This is particularly true for consumers who might be more vulnerable.”
Royal Mail has been lobbying ministers to switch from a six to five-days-a-week letter service. It argues that customers no longer value Saturday postal rounds amid falling letter volumes.
It comes as Royal Mail tries to transform itself from a letters-led to a parcel-led postal service. Downgrading letters and upgrading parcel deliveries to seven-days-a-week is a core plank of plans to return UK operations to profitability.
The switch would require MPs to vote through a change in postal laws.
Regulator Ofcom has estimated that cutting Saturday letter deliveries would save Royal Mail up to £225m per year.
Royal Mail’s chairman Keith Williams warned in December that “considerable” increases in the cost of a first class stamp would be needed to balance the books if it has to continue with a six-day letter delivery service.
He said: “You’re delivering the same number of letters over six days when you could be doing it over five. So that is forcing up stamp prices.”
Second class stamps are more heavily regulated than first-class equivalents, giving Royal Mail less scope for price increases.
The cost of a first class stamp rose to more than £1 for the first time in Royal Mail’s 500-year history in March. A price rise from 95p to £1.10 was implemented in April – a 16pc increase, well ahead of inflation.
The Government decision follows reports by the Telegraph of the emergence of “postal deserts” up and down Britain as a year-long industrial dispute – and associated rock bottom morale among workers – takes its toll of operations.
Last month Ofcom launched an investigation after Royal Mail unveiled its worst performance on record. Just 74pc of first class deliveries were completed on time in the year to March 2023 – well below its target of 93pc and the worst performance since it began collecting data in 2007.
Although the Royal Mail board has now struck a pay deal with leaders of the 115,000-member Communication Workers Union, a ballot of postal workers is yet to be completed.
Royal Mail chief executive Simon Thompson stepped down in May after little more than two years in the job. Mr Thompson regularly clashed with union leaders during a bitter industrial campaign that led to the worst wave of strike action in decades.
A spokesman for Royal Mail said: “It is clear that when letter volumes have declined by more than 60pc since their peak in 2004-05, in order to be financially sustainable, the Universal Service requires urgent reform.
“Ofcom’s own research shows that a five-day (Monday-Friday) letters service would meet the needs of 97pc of consumers and SMEs.
“Being required to provide a service that customers have said they no longer need, at significant structural cost to Royal Mail, increases the threat to the sustainability of the Universal Service.”
