Royal Mail to unglue its second-class service
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “The change to less frequent second-class deliveries will be music to the ears of Royal Mail’s new owner, EP Group. Royal Mail had been reining in losses, thanks to higher stamp prices, but there has been a lot riding on expectations of regulatory change. Letters have long been in structural decline, as email, text and social media updates have taken over as correspondence. Royal Mail’s public service obligation was weighing down its transformation. Maintaining an infrastructure for a six-day-a-week universal service when volumes have been dwindling, hasn’t been a recipe for an efficient operation, and it has arguably held back change. Although the Monday to Saturday service will remain for first class letters, which means urgent correspondence will still get through, the adjustments will relieve the pressure to deliver and will help trim costs. But inevitably, it has raised questions about how expensive stamp prices have become. They were increased partly to help maintain the universal six-day service, but now these changes have been made, it’s not surprising Ofcom is now looking closely at the affordability of using the post. It’s unlikely to give the green light to any more hikes, any time soon.
Parcel volumes have also been down from the booming demand seen over the pandemic, with rivals making inroads on its market share. However, the group’s international arm GLS has been performing well and it likely to be the blueprint to follow to get the UK business into better shape, which is still set to need significant investment.
With first-class postal service ringfenced for now, it does keep the iconic red post box in business. But if letter sending continues on its seemingly inexorable decline, there is still the risk it could go the same way as the telephone box, revered for its history and not its usefulness.”