End to daily rounds debated as Royal Mail drops into red

SCRAPPING daily deliveries and introducing communal mailboxes may have to be considered to protect the one-price-everywhere postal system after Royal Mail went into the red for the first time, the industry's watchdog group warned last night.

Postwatch Scotland said the UK's unique six-day postal delivery service might have to be reduced to cut costs, with residents no longer having mail brought direct to their doors.

The suggestion was made as Royal Mail yesterday announced that the "universal service", in which letters are delivered anywhere in the UK for the same price, made its first loss last year – of £100 million.

This has been blamed on people sending fewer letters as they increasingly use e-mail to communicate, and pay bills online. Businesses are also switching non-urgent mail from first to second class to save money.

However, Royal Mail's parcel volumes are increasing thanks to online shopping.

The firm has also suffered from competition in the lucrative business mail market, although no rivals have yet emerged to challenge its monopoly over domestic post.

An independent review ordered by the government reported this week that opening the postal market to competition has seen no significant benefit for consumers and smaller businesses. It also found there was a "substantial threat" to the financial stability of the Royal Mail and the universal service, which has run since 1840.

The review panel will make recommendations to ministers later in the year.

Postwatch Scotland said protecting the universal service was particularly vital in Scotland because of its large number of rural communities.

Tricia Dow, the watchdog's director, said: "The service is vitally important to everyone, and we are confident in the government's commitment to it.

"However, to ensure the fundamental one-price-everywhere element stays, other aspects may need to be changed and should be open to debate.

"The rest of Europe has deliveries on only five days a week, where people also collect their post from mailboxes, such as at the bottom of tenement stairs."

Billy Hayes, the general secretary of the Communication Workers Union, said: "Royal Mail's financial results clearly show how unfair competition is undermining the ability to provide a universal postal service.

"The status quo is not sustainable and unless the current arrangements in the postal market are changed for the better the public will lose a valuable and irreplaceable postal service."

Adam Crozier, Royal Mail's chief executive, said: "The universal service is a huge asset for Royal Mail and for the nation as a whole.

"But it is now in the red for the first time … so it is vital that we have the opportunity for a real debate about how the service should be financed and sustained."

A spokeswoman for the Royal Mail said the company "absolutely" wanted to continue the universal service.

She said: "It plays an essential role in social cohesion, but we need to know how this service can be paid for since we make no money from it."

Royal Mail's results for the year to March also showed its letters business lost £3 million – the first loss since 2002. It handled three million fewer letters a day than a year ago.

The firm's profits fell by nearly one-third to £162 million, the lowest figure for five years, although it said these were ahead of expectations. However, revenue increased by 2.3 per cent to £9.4 billion, mainly because of the parcels boost.


A YEAR OF TROUBLES

THE first-ever losses for its universal postal service ended a woeful year for the Royal Mail, which saw the firm hit by severe industrial action, with official and wildcat strikes bringing deliveries to a halt.

Workers protested over pay, jobs and pensions, with union demands including reform of the company's pension scheme, a pay rise this year of 2.5 per cent and changes to working practices.

The disruption cut the performance of postal deliveries to their worst level in five years, with nearly one in five first-class items not being delivered the day after being posted.

Edinburgh, Falkirk and Dundee were among the 20 worst-performing postal areas in Britain.

Alan Alexander, the chairman of Postwatch Scotland, said: "Royal Mail let customers down and has driven many into using alternative means of communicating. It is doubtful that those customers who moved away from mail will return.

"Even after the strike was over the company failed to meet customer expectations at Christmas. This is the busiest posting time for households, and with more and more deliveries from internet shopping, an opportunity to rebuild a tarnished brand was squandered."