Time for Royal Mail to deliver?

It’s far from a first-class service

The Royal Mail wants to cut second-class deliveries to every other weekday. The company, privatised a decade ago, is struggling with plummeting letter volumes and heavy financial losses. The proposal comes as Royal Mail’s parent company, International Distributions Services (IDS) battles to convince investors that its proposed new strategy is sound. Chief executive Martin Seidenberg is attempting to reverse the fortunes of the letter delivery services, while at the same time expanding the profitable international parcels arm, GLS. This comes in the face of a potential hostile takeover bid for IDS. A £3.1bn preliminary offer came from Czech billionaire Daniel Křetínský, whose own company EP Group is the largest shareholder in IDS. The offer was described as “highly opportunistic” by IDS chair, Keith Williams. Křetínský has denied that his plan is to retain GLS and sell off failing sections of the business.

The ongoing wrangling and turmoil do little to boost confidence in the 508-year-old Royal Mail, or to convince the public that the reliability of letter deliveries will improve. The new proposals follow a consultation by industry regulator Ofcom on potential changes to the universal service obligation (USO), the remit held by Royal Mail to deliver nationwide at one price, six days a week. IDS promises a continuing, national, six-days-a-week, first-class postal service, and seven days for parcels.

The new plan would see around 1,000 jobs cut, although unions have been assured there will be no compulsory redundancies. And 7,000 to 9,000 daily delivery routes would also be axed, saving up to £300m a year. Under the scheme, first-class letters would probably be delivered by the network of Royal Mail vans used for parcels. Bulk business mail, including utility company bills, would see deliveries slowed to the new second-class speed, arriving within three weekdays instead of two. Royal Mail reckons this solution offers “the choice of price and speed”. But with stamp prices rising sharply four times in the past two years and reports of increasing late letter arrivals, consumers might be feeling it’s way past time for the Royal Mail itself to get up to speed and deliver.

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