This page sets out Royal Mail's position at the time of privatisation
On 15 October 2013 Royal Mail became a quoted company with shares traded on the London Stock Exchange. Its market capitalisation at entry was £3.3bn with more than 99 per cent of its 150,000 UK employees holding shares in the company.
For Royal Mail to innovate and remain competitive in the marketplace we need to continue our investment. Our status as a listed company will help us to deliver our long term strategy. Here are a few simple facts regarding our business and the services it provides:
Six-days-a-week delivery at a uniform, affordable price
The Universal Service - six-days-a-week collection and delivery at a uniform price – is enshrined by the Postal Services Act 2011. Any change to the Postal Services Act would have to be passed through an affirmative vote in both Houses of Parliament. EU law also obliges member states to provide affordable universal postal services five days a week.
Royal Mail will continue to be the provider of the universal postal service, which is protected in primary legislation – the Postal Services Act 2011. Six-days-a-week delivery and collection at uniform and affordable prices are requirements protected in legislation. This can only be changed by Parliament. For Royal Mail, Saturday is a very important delivery day – for the same reason it is important to our customers.
Quality of service
In a very competitive market, Quality of Service is one of the key drivers of success. The Quality of Service regime still applies to Royal Mail. Ofcom has specified the minimum standards under the Universal Service Order, set in law.
Royal Mail is honoured to provide the Universal Service to over 29 million addresses in the UK. Rural areas will continue to receive a full, six-days-a-week collection and delivery service at a uniform tariff. The Universal Service is enshrined by the Postal Services Act 2011. Any change to service levels or the uniform tariff would have to be passed through an affirmative vote in both Houses of Parliament.
The quality of service standards that apply to Royal Mail, set by Ofcom in the Universal Service Order continue to apply. These are among the highest of any major European country and include:
|Delivery routes completed each day||99.90%|
|Access points served each day||99.90%|
|Postal packets deemed delivered||99.50%|
|First class mail delivered next working day||93.0%|
|Second class postal packets up to 1kg delivered within 3 working days||98.5%|
|Second class postal packets more than 1kg delivered within 3 working days||90%|
|Special Delivery up to 10kg delivered by 13:00 next working day||99,0%|
|International Mail going to the EU delivered within 3 working days||85.0%|
|Post Code Area (PCA) Target||91.5%|
Royal Mail is very proud to provide the Universal Service and of the role we play in the economy. We make commerce happen by connecting companies, customers and communities across the UK.
The services used by small businesses are protected by law. The Postal Services Act 2011 and the EU Postal Services Directive 1997 require universal postal service prices to be affordable. Ofcom found in March 2013 that Royal Mail’s services were affordable to small and medium sized businesses. Ofcom said (in their report on the affordability of postal services, published 19 March 2013):
"The evidence we have collected indicates that universal postal services are affordable for both residential consumers (including low income and other vulnerable consumers) and businesses (including small and medium businesses) at current prices. We have reviewed the price changes that are due to take effect from 2 April 2013 (as announced by Royal Mail in March 2013), and consider that universal postal services will continue to be affordable following these changes."
The prices of Royal Mail franking services used by business have lagged behind inflation for many years and continue to do so. Franking customers benefit from good value prices and significant discounts, saving more than 21 per cent on the price of a First Class letter and 34 per cent on the price of a Second Class letter.
Ofcom has set safeguard price caps on Second Class stamped mail, which also covers Second Class parcels up to 2kg. The safeguard cap is set for seven years, for letters it was set at 55p, rising in line with CPI. Ofcom is legally obliged to ensure an affordable postal service and can reintroduce regulation on any Universal Service product.
Stamp prices are subject to significant competitive pressures. Customers have many alternatives to the post. It is pure speculation to suggest that stamp prices could reach £1 in the next few years – in fact in 2013 there was no increase in the price of first class or second class stamps for letters.
Ofcom set safeguard price caps on Second Class stamped mail in 2012, which also covers Second Class parcels up to 2kg. The safeguard cap is set for seven years. For letters it was set at 55p, rising in line with CPI. Ofcom is legally obliged to ensure an affordable postal service and can reintroduce regulation on any Universal Service product.
In 2012, Ofcom said that Royal Mail’s financial position meant "there is a risk to the financial sustainability of the Universal Service". Ofcom recognised the need for Royal Mail "to materially increase prices in order to support the sustainability of the universal service." Stamp prices are subject to significant competitive pressures. Royal Mail has chosen to keep letter stamp prices unchanged in 2013. Ofcom found in March 2013 that Royal Mail’s services were affordable to consumers and small and medium sized businesses.
UK stamp prices are among the best value in the EU. In five of the six weight steps for First Class and Second Class mail, the cost of UK stamps are ranked in the bottom half of prices when compared with other EU countries. In some cases, the UK is the cheapest.
Our requirement to fulfil the Universal Service requires us to collect and deliver letters six days a week (and packets five days a week) at an affordable and geographically uniform price to every address in the UK. This ensures that, wherever our customers live and work, they are not excluded from the postal service system.
Royal Mail is proud of its heritage and its post box estate. It is one of the best brands in the country and is a strong and valuable asset. Post boxes are an iconic piece of British street furniture. We work closely with the Letter Box Study Group, the British Postal Museum and Archive, and English Heritage to ensure that the character of our post box estate is maintained. The Sovereign continues to approve all stamp issues. The Secretary of State has the power to ensure her image appears on stamps. This process is safeguarded in the Postal Services Act 2011 (Section 62 – "UK postage stamps bearing an image of Her Majesty").
The British Postal Museum and Archive
Royal Mail established the BPMA in 2004 to manage the public records of The Royal Mail Archive. Stamps form part of the public record and could only be sold with the agreement of the National Archive and other Government bodies. The Postal Services Act enshrines in law the obligation to protect the archive. The long-term funding agreements signed between Royal Mail and the BPMA will continue.
Post to the Armed Forces
Royal Mail is very proud to deliver a free of charge service to our armed forces undertaking operations. Free post to the armed forces will continue. The Ministry of Defence fully reimburses Royal Mail for provision of these services.
Free postal services for the blind
The Government, for the first time, made free services for the blind one of the minimum requirements of the universal postal service in the Postal Services Act 2011. Only Parliament can decide to downgrade these minimum requirements. Royal Mail is very proud to provide this much needed service, which costs around £6.2m each year to deliver. We work closely with the RNIB, as the UK's leading charity supporting those with sight loss, to ensure that the Articles for the Blind scheme meets the needs of blind and partially sighted postal users.
Rules governing the implementation of VAT are a matter for HMRC, not Royal Mail. VAT exemptions for core postal service delivery products such as stamps, by Universal Service Providers (USP), are in place in the vast majority of EU countries under the European VAT Directive. Under the Postal Services Act 2011 Royal Mail is the USP in the UK.
Similar VAT exemptions are in place for Universal Service products in Germany, Austria and the Netherlands. In each country the USP is privately owned.
The Post Office
Royal Mail plc and the Post Office are separate companies with independent Boards. Royal Mail is the company that delivers parcels and letters – the provider of the universal postal service. The Post Office is the nationwide network of branches offering a range of postal, Government and financial services. The Post Office remains in public ownership.
Royal Mail and the Post Office are natural partners and the Chief Executive of Royal Mail has said it would be "unthinkable" that there would not always be a strong commercial relationship between the two companies. A long term commercial agreement between the Post Office and Royal Mail for the continued supply of services was signed in 2012.
The Government has made a clear commitment to no further programme of Post Office closures. The network is now at its most stable for 25 years, at around 11,500 branches. It is also committed to maintaining the network at its current size and is giving the network £1.34 billion of funding for transformation. The two companies have signed a long term commercial agreement that secures their close relationship. It is in both Royal Mail and Post Office Ltd’s interest to ensure a strong, comprehensive post office network.
Documents and announcements
Below is a list of all the documents and announcements regarding the Intention to Float, Share Offer and Stock Market listing.
|15 October 2013||Stock Market listing|
|10 October 2013||> Pricing Statement (PDF)|
|10 October 2013||> Announcement of Offer Price (PDF)|
|27 September 2013||> Royal Mail plc Prospectus 2013 (PDF)|
|27 September 2013||> Royal Mail plc Summary Prospectus 2013 (PDF)|
|27 September 2013||> Royal Mail Share Offer - Expected Price Range and Offer Launch (PDF)|
|12 September 2013||> Announcement of Intention to Float (PDF)|