According to the communications regulator, Royal Mail has the potential to save £650m by reducing letter delivery to three days a week and an additional £200m by discontinuing Saturday deliveries.
According to the watchdog, decreasing the number of working days from six to five would result in savings of £100m to £200m, while reducing it to three days would save between £400m and £650m.
In a highly awaited evaluation, Ofcom presented a range of choices for the fate of the universal service obligation (USO), which mandates Royal Mail to provide nationwide delivery six days a week at a set cost.
Last year, the regulator started collecting evidence to demonstrate potential reforms for the service in order to better meet the needs of consumers. This was prompted by a gradual decrease in letter volume and a significant increase in parcel shipments due to the rise of online shopping.
Ofcom stated that there is a growing possibility that Royal Mail may not be financially or operationally viable in the future due to the expenses involved in fulfilling the Universal Service Obligation.
The watchdog emphasized that it was not seeking input on particular plans, but noted that there were two main options for improvement: reducing the number of days for letter delivery, or implementing changes that could result in first- and second-class deliveries taking up to three days or more. This would be paired with a next-day service for urgent letters, according to the watchdog.
The review included consumer research and financial modeling of Royal Mail. A further update is scheduled for later this year to gather opinions.
According to Melanie Dawes, the head of Ofcom, postal workers are an integral part of our society and play a crucial role in communities across the country. However, the amount of letters being sent has decreased by half since 2011, while the number of parcels has increased. The universal postal service has remained unchanged since then and is becoming outdated, putting it at risk of becoming unsustainable if no action is taken.
“We have presented potential solutions for change, in order to facilitate a nationwide dialogue about the fate of universal postal services. Meanwhile, we are ensuring that pricing remains reasonable by implementing a limit on the cost of second-class stamps.”
According to a survey conducted by Ofcom, 88% of participants stated that reliability is a crucial factor for letter deliveries, while 58% considered a Saturday service to be important. This is lower than the 63% reported in the previous survey conducted in 2020.
Those who are interested have until April 3rd to share their opinions with the governing body.
The CEO of International Distributions Services, Martin Seidenberg, has expressed concern about the lack of government and Ofcom action regarding this issue. He has been advocating for a solution for the past four years and now believes the situation has become more urgent.
“Despite the chance for change being recognized by other nations, the UK is falling behind. There has been significant debate surrounding the discontinuation of Saturday mail deliveries in the UK, yet other countries have demonstrated the existence of various alternatives to be considered.”
The Royal Mail has been advocating for the ability to reduce Saturday deliveries, but the government denied the request last year. Recently, it was revealed that the possibility of this change is being examined, with Downing Street expressing opposition to the idea.
On Wednesday morning, the Minister for Postal Services, Kevin Hollinrake, announced that the government is dedicated to maintaining a six-day delivery service provided by the Royal Mail.
During an interview with Times Radio, he stated that the Prime Minister has emphasized the significance of maintaining six-day delivery for both the citizens and businesses in the country.
The universal service has remained the same since it was established according to the Postal Services Act 2011, and any major modifications would require a vote from Members of Parliament.
According to Ofcom, it is ultimately up to the government to decide if any alterations are necessary for the minimum requirements of the universal service.
In a letter to Members of Parliament last week, Seidenberg stated that the USO is not feasible in its current state and referenced similar changes made in other European nations.
Dave Ward, the general secretary of the Communication Workers Union, said: “To produce a report without any input whatsoever from frontline workers of their union is an attempt to railroad through the failed agenda of the previous Royal Mail management team.”
“We are planning to initiate a thorough involvement process and generate our own assessment on the outlook of Royal Mail,” he stated.