Yahoo Finance Royal Mail modernisation plan: What changes is it proposing and how could they affect you?
Britain’s embattled postal service has called for urgent action to modernise its operations as it faces rapidly declining letter volumes and increased competition from niftier couriers.
Royal Mail has proposed several measures to “deliver a more efficient and more financially sustainable Universal Service”. It comes in response to Ofcom’s call for input into a national debate on the future of the Universal Service Obligation (USO), which ensures mail delivery across the country.
The watchdog has called for the modernising of Royal Mail, with proposals including a slower first-class service and reducing the number of delivery days from six to three.
The push for reform comes amid plummeting letter volumes, which dived from a peak of 20bn to just 7bn last year. Volumes are expected to drop to around 4bn in the next five years. Ofcom has suggested that cutting delivery days could save Royal Mail hundreds of millions of pounds.
But politicians and business groups have opposed any alterations to the current six-day delivery guarantee of the USO, saying it could hurt the nation’s already weak economy.
At the same time, the nation’s postal service is contending with competition from more agile and digital-savvy rivals such as Amazon, DPD and Hermes. Despite certain gripes over these services, they generally operate on lower running costs while offering greater convenience and flexibility.
To deal with these challenges, Royal Mail has suggested changes such as delivering non-First Class letters every other weekday and aligning the delivery speed of bulk business mail to Second Class standards, meaning they would arrive in two days instead of three.
Royal Mail, which is owned by International Distributions Services (IDS), has also proposed the introduction of digital updates including revised reliability and speed targets for First and Second Class services, as well as adding tracking to Universal Service parcels.
Martin Seidenberg, chief of IDS, said: “The fact that letter volumes have dropped from 20bn to 7bn a year means that the Universal Service is now unsustainable. If we want to save the Universal Service, we have to change the Universal Service. Reform gives us a fighting chance and will help us on the path to sustainability.
“Our proposal is based on listening to thousands of people across the United Kingdom to ensure it meets their needs. We have worked hard to come up with a proposal that is good for our customers, good for our people and would allow Royal Mail to invest in products and services that the UK wants.
“We have serious concerns that the urgency of the situation is not properly recognised by Ofcom. With no need for legislation there is no need to wait.”
Royal Mail is pressing for swift action from the communications regulator, urging for new regulations by April 2025 at the latest. It claims these reforms could save up to £300m annually, allowing for investment in modernisation efforts and reducing environmental impact.
Posties, it said, would deliver to more addresses on every round, reducing the number of daily delivery routes by up to 9,000 in the next two years. The company expects no compulsory redundancies and fewer than 1,000 voluntary redundancies. “The reduction would be managed through natural turnover wherever possible.”
An Ofcom spokesperson said: “At this stage, we’ve not made any proposals to change the universal postal service. We’ve set out evidence suggesting it risks becoming unsustainable if we don’t take action, as people send fewer letters and receive more parcels.
“We’ve laid out some potential options so there can be a national discussion about its long-term future. We’ll carefully consider all the feedback received, and provide an update in the summer.”
It will be a busy start for new Royal Mail boss Emma Gilthorpe, who is set to take the reins from May this year, after a stint as chief operating officer at Heathrow Airport.
