Royal Mail has increased the price of its first-class stamps by 15p (US$0.18) to £1.10 (US$1.32) and the price of its second-class stamps by 7p (US$0.08) to 75p (US$0.90).
This price increase will come into effect from April 3, 2023. According to the postal service, the increase is to ensure the one-price-goes-anywhere universal service remains sustainable and has been subject to careful consideration by Royal Mail. The decision was made in light of the 25% drop in letter volumes since the Covid-19 pandemic, which increased costs and inflation rates. Additionally, letter volumes have decreased from 20 billion letters a year in 2004 to approximately 8 billion letters per year in 2023, while the number of addresses has risen by four million in the same period. These changing customer behaviors and the growing number of UK addresses have therefore increased the costs of delivering the universal service.
Royal Mail is currently expected to report an adjusted operating loss of £350m (US$419m) to £450m (US$539m) for 2023. In 2022, Royal Mail requested that the government amend the universal service obligation from six days a week to five for letters – in light of changing consumer needs and the company’s materially loss-making position.
Across Europe, the median price for the equivalent of a first-class letter service (0-100g) is £1.25 (US$1.50). Ofcom’s research shows that a five-day letter service (Monday to Friday) would meet the needs of 97% of consumers and SMEs. Being required to provide a service that consumers have said they no longer need, at a significant structural cost to Royal Mail, increases the threat to the sustainability of the universal service.
Nick Landon, chief commercial officer at Royal Mail, said, “We appreciate that many businesses and households are facing a challenging economic environment and we are committed to keeping our prices affordable. Letters have declined by 25% compared to pre-pandemic. We have to carefully balance our pricing against a continued decline in letter volumes and the increasing costs of delivering letters six days a week to an ever-growing number of addresses across the country. We are seeing a fundamental change in consumer needs with a greater shift in demand from letters to parcels. It is vital that the universal service adapts and stays both relevant and sustainable. We need to make these price changes to ensure we can continue to maintain and invest in the one-price-goes-anywhere universal service for years to come.”
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