Royal Mail CEO Simon Thompson warns that without urgent support for postal reforms, potential consequences loom for the government.
- The Universal Service Obligation (USO) is outdated, amidst declining letter volumes and an increase in parcel deliveries.
- Royal Mail has called for changes to the USO to transition from letter-centric to a competitive parcel delivery service.
- A takeover bid from EP Group adds financial pressure alongside a necessary 30p rise in first-class stamp costs.
- The CEO highlights the crucial need for operational changes to sustain the future of Royal Mail, emphasizing parcel delivery growth.
Royal Mail’s CEO Simon Thompson has cautioned both Labour and Conservative ministers regarding the critical need for postal reforms. He asserts that without governmental backing, the responsibility of addressing potential fallout lies with the ministers. His statement comes before Ofcom’s anticipated consultation on these matters, aimed at updating the Universal Service Obligation (USO).
The USO, which mandates uniform pricing for mail delivery across the UK, is now perceived as outdated. This is due to the significant decline in letter volumes and the concurrent rise in parcel deliveries. Thompson points out that the financial burden of maintaining the current USO standards could very well hand the problem over to the government, should reforms not be pursued.
Royal Mail’s plea for adjustments to the USO is rooted in its strategic shift from a traditional letter carrier to a modern parcel delivery service. Ofcom’s upcoming consultation is expected to discuss potential amendments like reducing delivery days and reallocating resources towards the flourishing parcels market.
These reforms are deemed essential by Thompson, who assumed the role of CEO after heading the profitable European parcel division GLS. He argues that postal workers might be left ‘walking around with an empty bag,’ incurring losses in the absence of reforms. His tenure has been marked by persistent calls for immediate actions from political leaders.
In parallel to regulatory challenges, Royal Mail is navigating a takeover bid from EP Group, which is backed by Czech billionaire Daniel Kretinsky, the company’s largest shareholder. The company has also increased the first-class stamp price by 30p to £1.65, effective from October, citing urgent revenue needs.
Thompson’s leadership focuses on stabilizing Royal Mail amid financial strains, dwindling market share, and recent industrial disputes resulting in strikes. While there has been some progress, the company has not met delivery targets for two consecutive years and risks penalties from Ofcom.
Efforts to enhance operational efficiency have included hiring logistics experts and offering incentives for employees, leading to improved performance, notably during the Christmas period. However, despite these initiatives, Thompson warns that without reforming the USO, Royal Mail’s long-term sustainability is at risk.
Acknowledging the downward trend in letter volumes, from 20 billion pieces in 2004-05 to a mere 6.7 billion today, Thompson stresses the shift towards parcel deliveries, viewing it as the future of the postal service.
As Royal Mail strategizes its next steps, including exploring parcel lockers and electrifying its fleet, Thompson cautions that delays in reform and regulatory barriers could jeopardize progress. Ofcom’s findings, expected next summer, align with the postal sector’s peak season, augmenting the urgency for timely reforms.
The Royal Mail’s future hinges greatly on urgent and strategic postal reforms, with significant challenges and opportunities ahead.
