Just how bad is the British postal service?

As some readers will already know, I do a lot of investing on the UK and USA stock markets. I thought I was pretty good at choosing stock market ‘winners’, but that can’t be said for my decision (exactly two years ago this week) to buy shares in Royal Mail, which have fallen an incredible 49% in value since I bought them in January 2022. Oh well, you win some, you lose some! *

I invested in the company because I thought Royal Mail (now officially known as International Distributions Services PLC) was a company heading for success. How wrong I was!

The company’s share value has plummeted in the last two years, and so has their reputation with the British public. So much so, that in Spring last year, Ofcom launched an investigation into its terrible delivery record.

The service delivered only 73.7% of First Class mail within a day (far short of the 93% target). In addition, only 90.7% of second class mail was delivered within three days (the target is 98.5%). Ofcom said the impact of Covid was no longer "an excuse for poor delivery performance" and launched a full investigation into the causes of this poor performance.

Although it received little media attention, Ofcom published its report into Royal Mail just before Christmas, and it was not good for Royal Mail.


What did the Ofcom Report Say?

Ofcom fined Royal Mail £5.6 million for failing to meet its First and Second Class delivery targets in the 2022/23 financial year.

Under Ofcom’s rules, each year Royal Mail is required to deliver 93% of First Class mail within one working day and 98.5% of Second Class mail within three working days. In 2022/23, Royal Mail’s reported performance results showed that it had only delivered 73.7% of First Class mail on time and 90.7% of Second Class mail on time.

This means that Royal Mail breached its obligations by failing to meet its targets by a significant and unexplained margin. This caused considerable harm to customers, and Royal Mail took insufficient steps to try and prevent this failure.

Therefore Ofcom imposed a fine of £5,600,000 on Royal Mail. The penalty included a 30% reduction from the penalty they would otherwise have imposed, toreflect Royal Mail’s admissions of liability and its agreement to settle the case. The financial penalty is payable to HM Treasury within two months.

Ian Strawhorne, Ofcom Director of Enforcement said: “The company’s let consumers down, and the fine should act as a wake-up call - it must take its responsibilitiesmore seriously. We’ll continue to hold Royal Mail to account to make sure it improves service levels.”

He continued: “We are concerned that Royal Mail appears to have insufficient control, visibility and oversight over local decision-making at certain delivery offices where high absence and vacancies may have led to customer operations managers - who are responsible for individual delivery offices - making “on the day” decisions about what to deliver.”

“Given ongoing high absence and vacancies, and delays in bringing service levels back up, we are concerned about the operation of delivery offices, which we view as fundamental to Royal Mail meeting its delivery targets.”

“Royal Mail must ensure its customer operations managers are provided with appropriate training, so they are equipped to make such decisions. We will be keeping a close eye on the company’s performance this year, and the steps it is taking to return delivery offices to pre-Covid practices.”


What is the view of The Customer Service Blog?

As for me? Well I certainly won’t be buying any more shares in this shoddy company! And the British public are now becoming thoroughly fed up with the poor service they receive from our once great national postal service, not to mention the extortionate price of postage stamps.

Royal Mail has recently lost its 360-year-old monopoly on delivering parcels from Post Office branches, after concerns about the poor quality of service led to deals being signed with rivals Evri and DPD in the run-up to Christmas.

But what about the delivery of letters? Perhaps it’s time for the government to step in and either renationalise Royal Mail, or allow other private companies to take over the delivery of letters instead. When the public are paying so much money for letter delivery these days, the least they can expect is that their letters actually arrive on time!

© 2023 Darren Bugg

* UPDATE - since writing this article, the shares have rebounded in value and gone UP by nearly 70%. So maybe the company has finally turned a corner? Watch this space!


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