On 8th September, Royal Mail published a trading update covering the first five months of this financial year. It explained that Royal Mail has seen a substantial shift in its business from letters to parcels. The latest figures show that parcel volumes are up 34% whilst addressed letter volumes (excluding elections) are down 28% for the first five months of this financial year. That’s 177 million more parcels and 1.1 billion fewer letters. Royal Mail has not adapted quickly enough to the changes in its marketplace. COVID-19 has accelerated this trend, presenting additional challenges. It explains that Royal Mail expects to make a material loss in the 2020-21 financial year and will not become profitable again without substantial business change.
As a result, Royal Mail is currently exploring what a rebalanced Universal Service might look like. It has surveyed the views of thousands of customers about what they want from Royal Mail and the Universal Service – the Universal Service is the regulated service Royal Mail provides that gives everyone access to a range of products and services to every address across the country for the same price. That’s the ‘one price goes anywhere’ principle. This means that whether in Bristol or Blackpool, you can send an item in the post to another place in the UK at no added cost to you, no matter whether it’s 1 mile or 500 miles away. As part of this, Royal Mail has to deliver letters six days a week and parcels five days a week. It also provides a range of commercial (non-USO) services, including parcels on a Saturday.
So far, Royal Mail has found that the best way to ensure the Universal Service continues to meet its customers’ needs is to rebalance its service model more towards the growing parcels market, particularly urgent parcels and urgent letters. Royal Mail remains committed to the “one price goes anywhere” principle, but it would like to deliver the items its customers want more often, not less. To do that it needs a regulatory system fit for the future.
Royal Mail has not taken a view on what potential change might look like. It wants to speak to more customers and other stakeholders about what they want from Royal Mail and the Universal Service over the coming weeks. Royal Mail would therefore be grateful if you could complete a short survey, available here. It should not take more than five to ten minutes of your time and all information provided will be anonymised and treated confidentially.
Royal Mail will share its insights with its independent regulator, Ofcom, and Government in the autumn. The upcoming Ofcom review of both user needs and the wider regulatory framework will be vital to securing a platform which permits the investment required to deliver the Universal Service. Any substantive decision on change is a matter for Ofcom, Government and ultimately Parliament.