Review plea over direct deliveries

Royal Mail has called for an immediate review of the direct delivery market amid fresh warnings of the threat it poses to the universal delivery service.

Royal Mail has requested a review of the direct deliveries market
Royal Mail has requested a review of the direct deliveries market

The privatised firm has asked the regulator Ofcom to bring forward a review planned for next year to determine the regulatory changes it believes are needed to safeguard the nationwide, same price goes anywhere service.

In its submission, Royal Mail said it was already managing a structural decline in letters of between 4% and 6% a year, but highlighted the threat of "unfettered" direct delivery competition.

The company said its revenue could be cut by over £200 million in 2017/18 because of competition from rival TNT Post alone.

Direct deliveries from competitors undermined the universal service through "cherry picking", said Royal Mail, adding that other firms were not bound by the same stringent regulatory requirements it faced.

TNT is quickly achieving a local market share of 14% in areas where it operates and intends to cover 42% of UK addresses by 2017, said the submission.

An Ofcom spokesperson said: "We will consider the report Royal Mail has given us carefully. Protecting the universal service is at the heart of Ofcom's work, and our current evidence clearly shows that the service is not currently under threat. We would assess any emerging threat to the service quickly, in the interests of postal users."

Dave Ward, deputy general secretary of the Communication Workers Union said: "Ofcom's primary duty is to protect the universal service which allows us to send a letter to Belfast, Bristol or Brighton all for the same price. If Ofcom does not carry out an immediate review of the impact of direct delivery on universal service, it will have failed in its duty.

"The ability of TNT to be able to choose when, where and what they deliver has a profound impact on the sustainability of the universal service. Not surprisingly, TNT is cherry-picking big city deliveries only, where profits are maximised.

"This is unfair competition with little benefit to customers or the British public. In a shrinking letters market having two posties following each other up the same garden path is inefficient.

"The Government needs to wake up and realise the implications Ofcom's lack of action will have on Royal Mail's ability to deliver the universal service obligation. TNT is not introducing new jobs, they are just replacing decent and well-paid Royal Mail jobs with minimum wage employment and supporting the growth of a low-pay economy. In the end, workers everywhere will suffer through this race to the bottom."

A TNT spokesman said: "Royal Mail's call for a review of competition completely misses the point about the real issue facing their letters business - i.e. the internet. They need to focus on their inefficiencies to address this issue, not attack embryonic competition.

"Competition is the best news in years for the postal sector - we are creating jobs for thousands of people, many of them young or long-term unemployed who have changed their lives by working at TNT Post.

"TNT Post delivers less than 1% of the mail in the UK and the regulator has repeatedly made clear that there is currently no threat to the financial stability of the USO (universal service obligation) from plans from competitors to enter the UK delivery market. The internet is clearly the biggest challenge to postal volumes and Royal Mail needs to improve its efficiency to address this, no matter what.

"There is not a shred of evidence that postal delivery competition is a threat to the USO. Royal Mail should respond to the challenge of the internet and the opportunity presented by postal competition which will actually make for a more sustainable Royal Mail which is better able to deliver the USO in the years ahead."

Shadow business secretary Chuka Umunna said: "The Government's fire sale of Royal Mail has put postal services at risk.

"David Cameron's Government short-changed taxpayers to the tune of hundreds of millions of pounds while the City made a killing at the public's expense. Now, according to Royal Mail itself, the postal services and daily deliveries which consumers and businesses rely on are under threat.

"The next Labour government will secure the future of the universal service obligation, protect the historic link between Royal Mail and the Post Office network, and act to keep stamp prices at an affordable level at a time when families are being hit by a cost-of-living crisis."

Brian Scott of the Unite union said: "Jobs and the future of the universal post service is at real risk thanks to the Government's sell off of the Royal Mail and unfair competition from the likes of TNT who are allowed to cherry pick the most profitable deliveries in the big cities.

"From the Isles of Scilly to the Shetland Isles people rely on the universal postal service. Ofcom has a duty to review the impact of direct delivery on the universal service by a zero-hour minimum wage employer that doesn't have to operate to same service standards as Royal Mail."