Royal Mail - yet more bad news

The price of stamps will rise yet again next month - the fourth increase in two years for the cost of sending a letter first class. Royal Mail has announced that the price of a first-class stamp will rise by 10p to £1.35 and second-class stamps will increase by 10p to 85p.

The price rises come after a warning by the loss-making company over the impact of higher costs and lower demand for letters.

Nick Landon, chief commercial officer at Royal Mail, said: "We always consider price changes very carefully, but we face a situation where letter volumes have reduced dramatically over recent years while costs have increased. It is no longer sustainable to maintain a network built for 20 billion letters when we are now only delivering seven billion.”

He continued: "As a result of letter volume decline, our posties now have to walk more than three times as far to deliver the same number of letters as before, increasing the delivery costs per letter."


Why does Royal Mail have a problem?

Royal Mail made a loss of £419m last year, and has long-argued that their prices have to rise because of the lack of reform of the ‘one-price-goes-anywhere’ Universal Service Obligation (USO). This requires the company to deliver letters to all 32 million UK households six days a week, from Monday to Saturday.

The company said that adults usually spent less than £7 a year on stamped letters and people now receive two letters a week on average. It claims that the cost of stamps remains below European averages.


Will there be changes to the service?

Change to the service now seems very likely, with Ofcom saying the postal service was "getting out of date" and action needed to be taken. Under possible changes, Royal Mail could reduce the number of days it delivers letters from six per week to five per week, or even possibly three per week. The government claim that they are committed to keeping a ‘six-days-per-week’ service, but with a General Election looming, anything could change before the end of the year.

It estimated the company could save between £100m and £200m a year if delivery days were cut to five per week, and between £400m and £650m if there were just three postal days per week. Another option would be to extend the number of days it takes for most letters to be delivered.

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