Royal Mail has no more excuses to avoid fixing its failing business

A man dressed as a post box stands with striking mail workers
A man dressed as a post box stands with striking mail workers

The trouble with the Royal Mail is that there’s always bad news in the post. Its controversial privatisation a decade ago set the tone.

The main beneficiaries of its stock market float were the fee-hungry investment bankers that oversaw it, and even they took a haircut on what they usually charge.

A gaggle of hedge funds did well too, turning a quick profit on the brief share price bounce in the weeks that followed. Ever since then it’s swung from one crisis to another.

Perhaps Sir Vince Cable was right when he boasted that he did the right thing in shifting Royal Mail’s problems onto shareholders rather than the taxpayer.

With the company’s shares trading at a 40pc discount to their 330p listing price and a little more than 10p above historic lows of 187p set during the dark depths of the pandemic, the former business secretary will feel vindicated.

For a moment it seemed as though chairman Keith Williams, a veteran of several turnarounds, had steadied the ship, putting Royal Mail on course for a remarkable rebirth – but increasingly it looks as though it was largely the beneficiary of a lockdown-inspired postal boom.

Longstanding problems continue to threaten its very existence. After a protracted and bitter pay and reform battle with the Commercial Workers Union, Britain’s postal service looks like it is on the brink once again after racking up a thumping £1bn loss last year.

The latest blow is a hefty one after the Government rejected Royal Mail’s calls to tear up the Universal Service Obligation.

The company argues that the agreement, requiring it to provide letter delivery services six days a week to every single house in Britain if necessary, should be torn up and Saturday deliveries dropped.

Continuing them is financially unsustainable, it claims, with Williams protesting: “You’re delivering the same number of letters over six days when you could be doing it over five.”

Kevin Hollinrake - Charlotte Graham
Kevin Hollinrake - Charlotte Graham

The problem is that the USO can only be scrapped with Parliament’s say-so and it is refusing to play ball, business minister Kevin Hollinrake has announced.

“As you will be aware, we currently have no plans to change the minimum requirements of the universal postal service,” he said in a letter to the business select committee, which is probably about as conclusive a statement as you’re likely to find.

The Government’s position, Hollinrake explains, is that “the ability to send and receive letters and parcels is important both socially and economically”, particularly for more vulnerable people. That carries some weight but risks being somewhat outdated.

The UK is behind other parts of Europe in refusing to scale back services.

In France, scores of 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; Norway’s Posten Norge delivers on a Monday, Wednesday and Friday, then the following week only on Tuesday and Thursday; in Finland, the postal service delivers every day but only in certain areas with others receiving deliveries every other day. These are then rotated.

And the Government seems to be ignoring the results of an Ofcom survey, in which 97pc of UK users said a five-day-a-week letter service would be sufficient to meet their needs, as well the regulator’s estimations that axing Saturday letter deliveries would save Royal Mail up to £225m per year.

So it is possible to have some sympathy with the company’s demands. But with the Government ruling out an end to the USO, the Royal Mail now has no choice but to grasp the nettle and dramatically improve its service rather than relying on ministers to fix its problems.

Protesters chant slogans while holding placards saying "Thompson Out" during the demonstration. Stand By Your Post rally in Parliament Square - SOPA Images/LightRocket
Protesters chant slogans while holding placards saying "Thompson Out" during the demonstration. Stand By Your Post rally in Parliament Square - SOPA Images/LightRocket

Its priority has to be taking on the unions that continue to stand in the way of modernisation, and whose repeated strike action is behind a marked deterioration in service standards, including the emergence of “postal deserts” across the country.

With Ofcom already investigating Royal Mail’s failure to fulfill its basic duties, it wasn’t in the strongest of positions to be pleading for leniency.

Besides, getting rid of letter deliveries – the thing it is best known for – was never going to be a panacea.

On the contrary, letting the USO fall by the wayside, risks harming the Royal Mail’s reputation further and alienating its core customers to the point of torching the brand altogether.

One of Royal Mail’s chief gripes is that six-days-a-week letter deliveries hamper its ability to compete with Amazon and others on parcels, where volumes are growing quickly – unlike letters, which are in structural decline.

At the same time, however, if it wants to compete head-on with the parcel specialists then it surely doesn’t make a great deal of sense to be rubbishing the one thing that enables it to stand apart.

Alienating the British public by failing in its core duties seems like a pretty sizeable own goal.

Why would customers trust their parcels with the Royal Mail if the bread and butter of letter post isn’t arriving? During industrial action some parts of the UK have gone several weeks without any post at all.

With chief executive Simon Thompson seemingly the sacrificial lamb in a possible breakthrough with the unions, his successor – whoever that is – must quickly find a way to stop them calling the shots.

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