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At Royal Mail the excuses never stop coming. If only the same could be said of its service.
On Monday, Ofcom fined the company for missing targets for punctual letter deliveries by a big margin. Just 74pc of first-class letters arrived on time in the most recent financial year – way below a statutory requirement of 93pc.
Still, a penalty of £5.6m – equivalent to 0.07pc of £7.4bn in annual turnover – is hardly going to focus minds. Such a minuscule sum really is laughable – nothing more than a rounding error for an organisation of its size – and a reminder that Britain’s regulatory regime routinely fails to hold big business to account.
One can only assume that Ofcom was terrified at the damage that a more meaningful fine would exact on a vital British institution drowning in losses.
This time around, the Royal Mail has fallen deeper into the red. Operating losses at the postal arm of parent group International Distribution Services in the six months to September ballooned by nearly half to a thumping £319m, prompting another desperate plea for “urgent” reform of its six-day letter service commitment.
On this issue, management is probably right about the need for it to be scrapped. Though the thought of Royal Mail being able to wriggle out of an agreement enshrined in the Postal Services Act of 2011 will prompt an outcry in some quarters, a dispassionate approach is urgently needed.
The company’s argument that the Universal Service Obligation should be torn up and Saturday deliveries dropped is a perfectly fair one.
It is required to deliver letters six days a week to every one of the 32m addresses in the UK, and for the same price, too, no matter where the letters are going. But as chairman Keith Williams has previously noted, a plunge in letter volumes means: “You’re delivering the same number of letters over six days when you could be doing it over five.”
New chief executive Martin Seidenberg makes another compelling point, which is that it is currently forced to “maintain a network built for 20bn letters when we’re now only delivering 7bn.”
Meanwhile, Ofcom has previously estimated that going down to five days would save somewhere between £125m and £250m – savings that could be ploughed into the rapidly growing parcels arm.
The arrangement clearly makes little-to-no commercial sense. So why continue with it? Largely because a change in legislation is needed for it to be watered down and the Government has given the idea remarkably short shrift.
“The ability to send and receive letters and parcels is important both socially and economically,” particularly for more vulnerable people, junior business minister Kevin Hollinrake told the business and trade committee in June. There’s some merit in that, but it becomes much less compelling in the face of hard facts.
The reality is that letter volumes have fallen by 60pc in the last decade and a half. Indeed, the Government appears to be woefully out of touch on this issue.
In 2020, Ofcom conducted an extensive review of the postal market, which found that a five-days-a-week letter service would “still meet the needs of 97pc of residential and SME [small business] users”.
Its research also showed that over half of residential users (53pc) sent one or fewer letters per month, a proportion that will almost certainly have grown in the intervening years.
A more compelling argument, perhaps, is that scrapping six-day deliveries risks further compounding concerns about reliability, which could have a knock-on effect on the parcels side of the business.
A longstanding complaint is that the Saturday service constrains its ability to go toe-to-toe with Amazon, Yodel and others in a parcels market that is growing rapidly.
On the other hand, relinquishing its core duties might make customers reluctant to choose Royal Mail for their parcels if the bread and butter of letter post is landing on the doormat less frequently, especially in the knowledge that there are a growing number of more nimble alternatives out there.
Yet Britain risks quickly becoming an aberration as postal services are scaled back across Europe.
Norway’s Posten has been alternating between deliveries on Monday, Wednesday and Friday one week, then Tuesday and Thursday the following week since 2019 after the number of letters being posted fell more than two thirds over the preceding two decades.
In Finland, households receive post every other day because the postal service alternates the areas where it delivers. Scores of French towns are no longer receiving post on a daily basis as part of an experimental new system introduced in response to a marked fall in the number of envelopes sent by mail.
Yet surely nothing beats the post office in the tiny north-western Spanish town of Santibáñez de Vidriales, which went viral on social media after it emerged that it opened for just 15 minutes a day.
A spokesman for the Spanish postal service Correos explained that the short window was because the local postman had a round that included six other surrounding towns, and totalling more than 60 miles.
One imagines that residents have adapted fairly quickly, wherever the cutbacks. There’s no reason to think it would be any different here.
It is time to ditch the Royal Mail’s outdated letters pledge
Britain risks becoming an aberration as postal services are scaled back across Europe