UK regulator Ofcom has announced its proposed changes to the Royal Mail’s universal service obligation in a bid to keep pace with changing consumer habits and address falling service levels.
To ensure the universal service remains sustainable and delivers what people need, Ofcom is proposing to allow Royal Mail to deliver Second Class letters on alternate weekdays – still within three working days of collection – but not on Saturdays.
It is estimated that this change would enable Royal Mail to save between £250m (US$311m) and £425m (US$529m) a year, improve reliability and redeploy existing resources to growth areas such as parcels.
However, Ofcom stated that reforming these obligations is unlikely to be enough on its own to secure the longer-term financial sustainability of universal service, and that Royal Mail must invest in its network, become more efficient and improve its service levels in parcels and letters.
Natalie Black, Ofcom’s group director for networks and communications, said, “The world has changed – we’re sending a third of the letters we were 20 years ago. We need to reform the postal service to protect its future and ensure it delivers for the whole of the UK.
“But we’re safeguarding what matters most to people – First Class mail six days a week at the same price throughout the UK, and a price cap on Second Class stamps.”
Protecting what matters most
Ofcom said its research suggests that affordability and reliability are now more important to people than speed of delivery. However, eight in 10 (78%) value having a next-day service available for when they need to send the occasional urgent item, and a similar proportion (82%) value being able to send something for the same price anywhere in the UK.
Therefore, Ofcom is proposing keeping the following unchanged:
- A cap on the price of a Second Class stamp;
- One price goes anywhere throughout the UK;
- First Class next-day service six days a week.
Quality of service
Ofcom said that in recent years, Royal Mail’s delivery performance has not been good enough. The regulator has fined the company more than £16m (US$20m) and said that it will continue to hold it to account.
However, because the postal market has changed significantly since Royal Mail’s delivery standards were set two decades ago, Ofcom said it believes it is right to reassess these targets with the future in mind.
Therefore, it is proposing two sets of changes to Royal Mail’s delivery targets: small changes to the primary targets – for First Class mail from 93% to 90% delivered next day, and for Second Class mail from 98.5% to 95% delivered within three days; and new backstop targets to ensure that, even if letters miss the primary target, consumers have confidence that they will arrive in a reasonable period of time. For First Class mail, 99.5% would have to be delivered within three days of posting. For Second Class mail, 99.5% would have to be delivered within five days of posting.
Royal Mail response
Commenting on Ofcom’s announcement today (January 30), Royal Mail CEO Emma Gilthorpe said, “Ofcom has recognized the urgent need for change so that the future of the universal service can be protected for all.
“Our proposal was developed after speaking to thousands of people across the country and is designed to preserve what matters most for our customers: maintaining a one-price-goes-anywhere service to 32 million UK addresses and First Class deliveries six days a week.
“As Ofcom’s analysis shows, it is no longer financially sustainable to maintain a network built for 20 billion letters when we are now only delivering 6.7 billion. Reform is crucial to support a modern, sustainable and reliable postal service for our customers, our company and our people.”
Responding to consultation
Anyone can respond to Ofcom’s consultation. The deadline is April 10, 2025, and the regulator plans to publish its decision in the summer after carefully considering feedback received. If it decides to make any changes to the existing rules, Ofcom intends for them to come into effect on the day it publishes its decision. For more information, click here.