The British post office is in crisis and wants to break the strict shackles of basic services: only letters franked with expensive “first class” stamps should reach their addressees every day.
The Royal Mail is facing the worst crisis in its 507-year history. The traditional company is posting one deficit after another; in the first half of the current financial year, the operating loss amounted to 319 million pounds. On the one hand, the company, which was privatized in 2013, is engaged in a lengthy and costly industrial dispute with the unions over wages and working conditions.
On the other hand, the needs of customers have changed fundamentally: While Royal Mail has to fight against agile competitors in the booming parcel business, the company is bound to its basic legal mandate in the booming mail business. Under this Universal Service Obligation, the post office must deliver letters six days a week to all 32 million households in the UK – from Cornwall in the southeast of England to the far north of Scotland. Royal Mail was recently fined because it was unable to comply with these requirements.
Brits are sending fewer letters
The basic service is being used less and less: While two decades ago the British sent around 20 billion letters per year, this number has fallen to around 7 billion annually. Forecasts indicate a further decline in the coming years.
Now Royal Mail is fleeing forward. “If we want to save basic services, we have to change them,” explained Martin Seidenberg, CEO of the parent company International Distributions Services (IDS), this week. He presented reform proposals according to which the basic postal service would only remain available six days a week for “first class” shipments. The cheaper “second class” letters, on the other hand, would only be delivered two to three times a week.
According to Seidenberg, the reform could save Royal Mail 7,000 to 9,000 errands per day. This would result in annual savings of around £300 million and a reduction of 1,000 jobs, which could be achieved through natural fluctuation, according to Seidenberg. Customers, on the other hand, would have a choice when it comes to price and speed.
Pöstler is also supposed to come on Saturday
At the beginning of the year, the state regulator Ofcom opened a consultation process on the future of the post office. The focus was on two options: the general end to deliveries on Saturdays and an extension of delivery times. Above all, the prospect that the postman would no longer appear on Saturday sparked fierce resistance. The publishers of newspapers and magazines, for example, who rely on the delivery of their profitable weekend editions, saw their business model threatened.
Royal Mail’s latest proposal sparked mixed reactions. The Liberal Democrats referred to the recently increased prices for stamps and spoke of an impending “postal costs crisis”. The Greeting Card Association, which represents the interests of greeting card manufacturers, took a more conciliatory stance. She emphasized that the reduction in services for B-Post would be more manageable than the cessation of deliveries on Saturday. According to the association, no other nation sends more greeting cards for birthdays, weddings or deaths per capita than the British.
In crisis since privatization
Royal Mail was privatized in 2013 by the Conservative-Liberal Democrat coalition government. In order to attract investors, the government issued the company with pension fund obligations worth tens of billions. In addition, land and real estate from state ownership were transferred to the company. But after a series of losses, the share, which was valued at 561 pounds in 2013, is now worth less than half as much.
Management is partly to blame for the misery, especially since critics accuse the company of completely overlooking the boom in online shopping. However, the legal mandate to provide basic services also puts restrictions on the company. The requirement to serve all British households six days a week makes it difficult to cut gigantic staff costs, which amount to £5 billion a year for the 150,000 employees.
Basic postal services are also under discussion in other countries. In France, the state postal service extended the deadlines for delivering certain letters last year. It also introduced a hybrid e-letter that is printed close to the addressee and then delivered more quickly. In Switzerland, Communications Minister Albert Rösti is pondering a model according to which, from 2030, letters would only be delivered on three days of the week and at one speed.
In Great Britain, limiting the basic service to the more expensive A-Post would probably be possible without a revision of the law. The regulator Ofcom would have the final say and wants to decide on how to proceed by the summer. The IDS boss Seidenberg called on Ofcom to urgently put the reform into effect by 2025 in view of Royal Mail’s precarious situation.