Royal Mail continues drive to scrap Saturday post after union bends
Royal Mail has continued its push to ditch second class Saturday deliveries, piling pressure on Ofcom after unions suggested they were open to the idea last week.
International Distributions Services (IDS), the parent company of the national postal service, has released a presentation to show its vision of what a “modern and sustainable” Royal Mail might look like.
London-listed outfit IDS has claimed the current Universal Service Obligation (USO), which dictates the rules for Royal Mail, is financially unsustainable, as letter volumes have collapsed by more than half compared to 2011.
The USO requires that the Royal Mail deliver post at least six days a week. However, communications regulator Ofcom has suggested that cutting delivery days could save Royal Mail hundreds of millions of pounds and has called for a “national debate” on the matter.
IDS’ proposal, currently under review by Ofcom, is to maintain a Monday to Saturday service for first class post and move to alternate day delivery for second class mail.
On Tuesday, IDS boss Martin Seidenberg said: “Following extensive modelling and analysis of customer priorities, we have delivered to Ofcom a detailed proposal for Universal Service reform that is designed to be good for our customers and for growth, good for financial sustainability and good for our people.
“We have been calling for reform for more than four years and the lack of action by government and Ofcom has held back Royal Mail’s transformation. Ofcom has started the process of reform with its recent Call for Inputs and has said it will provide an ‘update’ in the summer.
“Given the urgency, we call on Ofcom to accelerate their review and start consulting on changes without delay to give our customers, our people and our shareholders the certainty they need,” he added.
An Ofcom spokesperson said: “There are a number of options for reforming the universal postal service. Some would require Government and Parliament to change primary legislation, while others could be made through changes to Ofcom regulations.
“We believe it’s important there’s a national debate, so everyone can have their say before we make any recommendations or proposals to secure its long-term future. Under any scenario, Royal Mail must modernise its network, become more efficient and improve its service levels.”
The watchdog has called for input into the debate and plans to provide an update in the summer.
Royal Mail’s proposals included a slower first-class service and reducing the number of delivery days from six to three. It has also promised to improve the speed of delivery of its service, as well as reliability and cost.
It says this could reduce the total cost of the Universal Service by up to £300m per year.
Some politicians, including Prime Minister Rishi Sunak, have opposed the idea of shelving Saturday post, arguing that it provides flexibility and convenience” for customers.
Even with Ofcom’s approval, changes to the USO would have to pass through parliament.
Until recently, the Communication Workers Union (CWU) has previously been an obstacle to Royal Mail’s efforts to reduce deliveries, but it now appears to have softened its stance. Last week, the chief of the CWU acknowledged that the current service “is no longer financially viable”.
Royal Mail is costing IDS a lot of money; late last year its group operating losses trebled in the first half of 2022, even as its successful parcels business, GLS, turned a profit.
It is facing the possibility of a takeover. Earlier this month, a major European conglomerate led by Daniel Křetínský, who is known as the Czech Sphinx, made a £3bn bid for IDS.
Over the past months, as rumours around the future of the company have circulated, shares in IDS have jumped 21 per cent.
IDS’s board rejected this proposal, but EP Group is open to further discussions.