Ofcom outlines possible change to Royal Mail service offering, invites feedback


Ofcom outlines possible change to Royal Mail service offering, invites feedback

Ofcom has proposed changes to the obligations on Royal Mail, while protecting features of the post that matter most to people,  to put the universal service on a more sustainable footing.

“The world has changed – we’re sending a third of the letters we were 20 years ago. We need to reform the postal service to protect its future and ensure it delivers for the whole of the UK. But we’re safeguarding what matters most to people – First Class mail six days a week at the same price throughout the UK, and a price cap on Second Class stamps,” said  Natalie Black, Ofcom’s Group Director for Networks and Communications

While many people still rely on post, the way they use it has changed dramatically. Twenty years ago, Royal Mail was delivering 20 billion letters. That number is now 6.6 billion a year, and Royal Mail expects it to be 4 billion a year in the next few years. These declining volumes have driven up the average cost of delivering a letter – as postal workers are walking more routes than ever, but delivering far fewer letters, the company has been losing hundreds of millions of pounds.

If the universal service does not evolve to align with customer needs, it risks becoming unsustainable, and people could end up paying higher prices than necessary. The UK is not alone in needing to respond to this challenge. Countries around the world are reforming their universal service obligations.

Ofcom’s research suggests that affordability and reliability are now more important to people than speed of delivery. It says that people have told it that most letters are not urgent. However, eight in ten (78 per cent) value having a next-day service available for when they need to send the occasional urgent item, and a similar proportion (82 per cent) value being able to send something for the same price anywhere in the UK.

On average, UK households spend just 60p per week on postal services – 0.11 per cent of their weekly outgoings. However, nine in ten (90 per cent) say it is important to have an affordable option available.

So, Ofcom is, it says,  protecting what matters most to people, and keeping the following unchanged:

  • continuing to cap the price of a Second Class stamp;
  • one price goes anywhere throughout the UK; and
  • six days a week First Class next-day service.

Second Class delivery changes

In its latest in-depth research, Ofcom says that most postal users said they do not need six days a week delivery for the majority of letters.

To ensure the universal service remains sustainable and delivers what people need, it is proposing to allow Royal Mail to deliver Second Class letters on alternate weekdays – still within three working days of collection – but not on Saturdays.

It has assessed postal users’ needs and provisionally concluded that the proposed new service would continue to meet them. Indeed, only 4 per cent of users think they would be very significantly impacted by the proposed changes.

It estimates that this change would enable Royal Mail to realise annual net cost savings of between £250m and £425m with successful implementation. This could enable it to improve reliability and redeploy existing resources to growth areas such as parcels.

However, reforming these obligations is unlikely to be enough on its own to secure the longer-term financial sustainability of universal service. Royal Mail must invest in its network, become more efficient and improve its service levels in both parcels and letters.

Quality of service

In recent years, Royal Mail’s delivery performance has not been good enough. In the last 18 months, Ofcom has fined the company more than £16m, and says it will continue to hold it to account. However, given the postal market has changed significantly since Royal Mail’s delivery standards were set two decades ago, Ofcom believes it is right to re-assess these targets with the future in mind, as has been done in many other countries already.

The UK has more stretching targets than comparable European countries. Maintaining the current higher standards would carry higher costs which would need to be recovered through higher prices. Research indicates that people are more willing to accept a reduced quality of service than price rises to pay for investment in higher quality.

Ofcom is proposing two sets of changes to Royal Mail’s delivery targets:

  • Small changes to the primary targets – for First Class mail from 93 per cent to 90 per cent delivered next-day, and for Second Class mail from 98.5 per cent to 95 per cent delivered within three days.

The proposed new targets would remain high by international standards. For example, Germany’s three-day target is 95 per cent, Spain’s is 93 per cent, and Norway’s and Poland’s are 85 per cent. In Ofcom’s 2020 review of postal users’ needs, it found that a reduction to 90 per cent would meet 97 per cent of people’s needs, compared to 98 per cent that are met by the current targets.

  • New backstop targets would ensure that, even if letters miss the primary target, consumers have confidence that they will arrive in a reasonable period of time. For First Class mail, 99.5 per cent would have to be delivered within three days of posting. For Second Class mail, 99.5 per cent would have to be delivered within five days of posting.

These new targets address the issue many people have experienced where letters have taken weeks to arrive. Many other countries have introduced secondary targets like this.

Have your say

Anyone can respond to Ofcom’s consultation – the deadline is 10 April 2025, and the final decision will be published in the summer, after carefully considering the feedback received. If changes are made to existing rules, they will come into effect on the day Ofcom publishes its final decision.

Viewpoints

In initial response to the proposed changes, Emma Gilthorpe, Chief Executive Officer, Royal Mail said:

“Ofcom has recognised the urgent need for change so that the future of the Universal Service can be protected for all. Our proposal was developed after speaking to thousands of people across the country and is designed to preserve what matters most for our customers – maintaining a one-price-goes-anywhere service to 32 million UK addresses and First Class deliveries six days a week. As Ofcom’s analysis shows, it is no longer financially sustainable to maintain a network built for 20 billion letters when we are now only delivering 6.7 billion. Reform is crucial to support a modern, sustainable, and reliable postal service for our customers, our company and our people.”

Steph Brown, Director of Brand Marketing at Visualsoft, shared what the new Royal Mail changes could mean for eCommerce businesses:

“Royal Mail’s changes to second-class letter deliveries could be just the start of a wider shift in how retailers handle logistics, customer communications, and returns. If costs rise, businesses will move even further towards digital-first solutions, we’ll likely see a bigger push for email, SMS, and app-based updates to replace traditional post.

Reliability is everything, and any uncertainty in delivery services means diversifying fulfilment strategies. While parcels aren’t affected (yet), some eCommerce brands might start looking at alternative carriers for both reliability and cost efficiency. If Royal Mail makes further changes down the line, competition could increase among delivery providers, with businesses diversifying their logistics partners to avoid future disruptions. If retailers are forced to switch to first-class post or alternative couriers, we could see an increase in operational costs, which may eventually be passed on to customers. This might push more brands towards free delivery thresholds or subscription-based models (e.g. “Prime-style” perks) to balance the books.

There’s also a bigger question mark over the impact on customer experience. Slower returns processing could lead to more businesses offering local drop-off points or instant refunds on proof of postage. Ultimately, brands that stay ahead of these shifts – adapting their shipping strategies, fine-tuning their customer comms, and setting clear expectations – will be in the strongest position to keep trust high and shopping journeys seamless.”

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