• Royal Mail welcomes the major review of the UK postal sector that Ofcom has published today. Royal Mail will carefully review the document before coming to a considered view on its main elements
• Royal Mail believes that the Ofcom proposals are a significant step towards securing a sound and sustainable Universal Service
• Royal Mail, which reported a £120 million loss last year in its core Universal Service activities and has had negative cashflow for a number of years, has been calling for a different approach to regulation for some time

Royal Mail believes that the proposed new approach from Ofcom is a significant step towards securing the future of the six-day-a-week, one-price-goes anywhere Universal Service to 29 million UK homes and businesses. Ofcom notes in its review that the obligations that apply to Royal Mail in respect of the Universal Service exceed those that apply in most other countries in Europe.

Radical Action Needed

Moya Greene, Royal Mail Group’s Chief Executive, said Royal Mail has been stressing the need for a very different approach as the old regulatory framework has accelerated the financial decline of Royal Mail. Ofcom has recognised that the old approach of tight price controls has not worked. Royal Mail has reported negative cashflow for a number of years and reported a loss of £120 million last year in its core Universal Service activities. Headroom price controls and mandated access, however, have driven more revenues out of Royal Mail than the structural decline in volumes. The average daily postbag of 62 million items is now 18 million fewer than just five years ago.

A Sound and Secure Universal Service

Royal Mail is pressing ahead with its vital modernisation programme. 45,000 people have left Royal Mail since 2002 as the necessary but difficult process of modernising the company continues. With its unions, Royal Mail is making painful changes to its operations to achieve the efficiencies that the regulator and customers expect.

A new balance must, therefore, be found to give Royal Mail the pricing flexibility it requires alongside the clear understanding that prices remain affordable, especially for disadvantaged households.

A Key Role in the UK

Royal Mail is an important part of the UK’s economic and social fabric connecting communities, companies and people. Ofcom’s proposed regulatory framework should also underpin the economic contribution Royal Mail itself makes as one of the country’s biggest employers with 163,000 people employed in virtually every community across the UK.

Ms Greene said: “We welcome Ofcom’s major review of the UK postal sector. This document merits a great deal of attention. We will give it just that before coming to our considered view on the new framework Ofcom is proposing. It is clear, however, that the Ofcom proposals are a significant step towards securing a sound and sustainable Universal Service. The proposals are timely too as radical action is needed now given the ongoing decline in volumes and revenues and the inability to cover the costs of our Universal Service activities.”

Royal Mail will give its detailed view on Ofcom’s proposals before the consultation on the proposed new regulatory framework concludes in early January. Ofcom intends to implement the new regulatory framework from next spring.

Ends

For further information contact

www.royalmail.com