LONDON: In a move to address the financial sustainability of the Universal Service, Royal Mail has unveiled a comprehensive proposal that seeks to modernize the service without legislative change.

The plan, which comes after extensive customer consultation, aims to maintain the core aspects of the service that customers value most while introducing necessary efficiencies to ensure its financial viability.

The proposal includes maintaining the one-price-goes-anywhere service, six-day-a-week First Class letter deliveries, and the choice between First and Second Class services. Additionally, parcels will continue to be delivered up to seven days a week.

However, to achieve a more efficient and financially sustainable service, Royal Mail suggests delivering all non-First Class letters every other weekday and aligning the delivery speed of standard bulk business mail to Second Class.

To modernize the Universal Service for the digital age, Royal Mail is also proposing new reliability targets for First and Second Class services and adding tracking to Universal Service parcels. These changes are expected to reduce the net cost of the Universal Service by up to £300 million annually, contingent on the rate of letter decline and the speed of reform implementation.

The need for reform is underscored by the stark financial figures: Royal Mail has incurred losses of £419 million in 2022-23 and £319 million in the first half of 2023-24. With letter volumes plummeting from 20 billion a year in 2004/5 to an anticipated four billion within the next five years, the company is facing an urgent challenge.

Martin Seidenberg, Group CEO of International Distributions Services plc, emphasized the critical nature of the situation, stating, “If we want to save the Universal Service, we have to change the Universal Service.”

He urged Ofcom to act swiftly, highlighting that the reforms could be achieved through regulatory changes alone, with a target date of April 2025 for the introduction of new regulations.

The proposed changes are expected to lead to a more efficient network, with posties delivering to approximately 70% of addresses on each route, up from the current 40%.

This would result in a net reduction of 7,000-9,000 daily delivery routes over 18-24 months. Royal Mail anticipates managing this reduction without compulsory redundancies, expecting fewer than 1,000 voluntary redundancies, primarily through natural turnover.

The proposal reflects a delicate balance between preserving customer service levels and addressing the financial pressures of a changing communication landscape. It aligns with successful reforms in other countries and represents a crucial step towards a sustainable future for Royal Mail and its stakeholders.

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