Second class letter deliveries face curbs under regulator's shake-up

Royal Mail may not be obligated to deliver second class letters on a Saturday in future, under plans being considered by the industry regulator.

Ofcom, which launched a consultation on the company's universal service obligation (USO) earlier this year, said such a shift would protect priority deliveries, including first class mail, and help loss-making Royal Mail save cash.

The watchdog said "modifications" to second class deliveries were being explored under proposals that would seek to meet the needs of households and businesses following sharp declines in letter volumes as communication technology has evolved.

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Also being considered was the delivery of second class mail on alternative weekdays while maintaining delivery targets for such items at three working days.

First class post would continue to be a six-day-a-week service, the regulator stated, adding that decisions would be made by next summer following further consultation.

Royal Mail responded by saying that change "cannot come soon enough".

"Ofcom's job is to make sure there is a universal postal service that meets the needs of users and is affordable, efficient and financially sustainable", the watchdog's statement said.

"In recent years, people have been sending far fewer letters, and Royal Mail has been losing hundreds of millions of pounds. If the universal postal service does not evolve to align with customer needs, it risks becoming unsustainable, and people could end up paying higher prices than necessary."

Royal Mail has long demanded changes to the USO as parcels have become its main focus for profitability.

Ofcom's proposals are in line with what it had suggested.

The focus on the company's responsibilities was intensified in the spring when it emerged that Royal Mail's parent firm, International Distribution Services (IDS), had formally accepted a revised £3.6bn offer for the business, which includes the international parcels arm GLS.

While Czech billionaire Daniel Kretinsky's EP Group has vowed to maintain its commitments under the USO, maintain its UK tax residency, headquarters, branding and existing employment rights, it is yet to get a seal of approval from government.

Critics of the deal include the Communication Workers Union, which represents Royal Mail's 110,000 frontline workers.

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IDS boss Martin Seidenberg said of Ofcom's announcement: "Our proposal for the future of the universal service has been developed after speaking to thousands of people across the country, and is designed to protect what matters most for customers.

"It can be achieved through regulatory change with no need for new legislation.

"The universal service faces a very real and urgent financial sustainability challenge.

"Change cannot come soon enough."