Post Office launches £1.34 billion branch network investment and support programme

Key points

  • Largest investment and network support programme in the history of the Post Office©.  Approximately 6,000 Post Offices converted into new, more modern branches over next three years.
  • £1.34 billion three-year programme, subject to EU State Aid clearance, to modernise the branch network and provide network subsidy, which recognises the major social value that Post Offices provide to communities.
  • Investment part of the Government’s commitment to no further programme of branch closures.
  • Between now and summer 2012, around 50 further new local and main branches will be piloted across the UK.  These new sites will complement the 177 current pilot branches and collectively help inform future roll-out plans.
  • Customers will benefit from a much better retail experience including extended opening hours.  All changes will be made in conjunction with existing subpostmasters through an agreed communication and consultation process.
  • The investment programme is designed to make the Post Office network more self-sustaining and, over time, less dependant on direct subsidy.
  • Full UK-wide roll-out of up to 4,000 main and around 2,000 local branches expected to start summer 2012, and conclude in 2015.

Post Office Ltd today announced plans to transform about half of its network of 11,800 branches across the UK over the next three years as part of an overall £1.34bn investment and support programme, subject to EU State Aid clearance.  The Post Office is a core part of the UK’s economic and social infrastructure – 99 per cent of the UK population lives within three miles of a Post Office branch. The investment will provide a more modern and convenient retail experience for customers, whilst maintaining the UK Post Office network at its current size.

All branches across the network will benefit either directly or indirectly from the investment as Post Office Ltd continues to find new business and grow its income.  The 5,500 branches, which will not become local or main branches, will retain their current operating model and will be supported by subsidy payments reflecting their key role in UK life.

Paula Vennells, Chief Executive Officer, Post Office Ltd, said: “This is a once-in-a-generation opportunity for the Post Office – a chance to revitalise the network and allow it to meet the needs of twenty-first century customers and communities.  This major investment will help Post Office Ltd address changing customer needs by revitalising the network, with extended opening hours and a better experience for our customers.”

Postal Affairs Minister Norman Lamb MP, said: “Post Offices are at the heart of many of our communities, providing much needed services. This Government has made a commitment that there will be no closure programme and invested £1.34 billion to secure the long term future of the Post Office.  However, change is needed to secure the long term future of post offices; the pilots are showing the new ‘locals’ and ‘mains’ models are popular with consumers and subpostmasters.  So I am pleased that Post Office Ltd are putting in place another 6,000 of these post offices over the next three years.  The new models will make the network more financially viable and give customers what they want when they want it.”

George Thomson, General Secretary of the National Federation of Subpostmasters, said: “This investment will bring significant benefits to customers, communities and local businesses right across the UK.  It provides a great opportunity for thousands of subpostmasters to modernise their post offices creating an improved, more sustainable network.  I believe the significant commitment from the UK Government will help secure Post Office branches at the heart of our communities for the long term.”

Andrew Dash, Subpostmaster at Falmouth Main Post Office branch and who is participating in the pilot programme, said, “When we were offered the chance to operate a new style Post Office branch, we jumped at the chance as we saw it as the perfect complement to our convenience store. It meant we could become a hub in the community.  The customers love it. We have a bright, modern Post Office in a bustling convenience store and our business has grown since we re-opened.”

Post Office Strategy

The transformation of the network is part of a wider strategy to win new customers and revenue streams for the business to ensure its long-term sustainability. In 2000, Post Office Ltd had around 28 million customer visits each week. This now stands at around 20 million.  As a result, at present, a significant part of the UK branch network benefits from a subsidy payment to sustain services to communities.  This investment programme will make the branch network more attractive to customers, subpostmasters and prospective clients.  The combination of extended opening hours and new business income will help sustain the network and over time make it less reliant on a subsidy from Government.

Winning more Government business is a key part of the Post Office strategy, for example, the roll-out of biometric data capture equipment to nearly 800 branches nationwide.  This allows Post Office Ltd to compete for tenders to deliver assisted application and identity verification services. Growing the Post Office’s existing financial services business is another key strategic priority. The Post Office is expanding its range of value for money financial services products.

Branch Selection Criteria

Under both the pilots and full roll-out phase, Post Office Ltd will work with subpostmasters who express an interest in converting to a new operating model.  A decision will be made on the most appropriate model for their branch, based on a range of selection criteria being met:

  • Main style branches are likely to be larger, busier branches with two or more counter positions that are currently used constantly throughout the week.  In the majority of main branches, the traditional standalone Post Office counter service will remain.  In addition, Post Office service will be available to customers at the retail counter.
  • Local style branches will be the model for smaller branches with two counter positions or less, but where both positions are not fully used throughout the week.  In these locals, there will be a Post Office service point on the retail counter - customers will benefit from a brighter, more modern retail experience and extended opening hours.

Main Style Branches

These will offer a modern environment and in many cases extended opening hours.  Many will be existing branches updated and refreshed.

Main style branches will offer both a dedicated Post Office counter and service provision at the retail position, thereby offering customers the full range of products and services and extended opening hours.  The model is currently operating at 16 locations throughout the UK. In some cases, existing branches will be relocated to suitable locations.  Subpostmasters who convert to a main style branch will receive investment for their branch of up to £15,000, or up to £30,000 or up to £45,000, depending on the branch size.  It is expected that the majority of the branches that will convert to this style will do so on the existing site.

Local Style Branches

This model is a way of operating Post Offices in convenience-type stores. By combining both the Post Office and retail service, the branch will offer extended opening hours to customers.  Subpostmasters who convert to a local style will receive investment of up to £10,000 for their branch.

Research has shown that 96 per cent of customers using a local style branch were very satisfied with the service. (*)  Participating subpostmasters said the local model has benefited their business.  This local style will be established either at an existing branch or at a suitable nearby retailer.  The model is currently operating at 161 locations throughout the UK.
(*) Post Office Local Refresh Evaluation – Topline Customer Feedback – November 2011

In like-for-like terms, Post Office branches operating this model will carry out the transactions which account for around 95 per cent of customer visits throughout the Post Office network.  As currently happens, some more specialised services, for example Passport Applications, continue to be available only at selected branches in the network.

The Customer Experience

The small numbers of transactions that will generally not be available at Post Office local branches include Motor Vehicle Licences, Passport Check and Send, Bureau De Change On Demand and Travel Insurance On Demand. This is, for the most part, not a change to the current situation as these more specialised services are currently only available at selected branches in the network.  The subpostmaster and their staff at all local and main pilot branches receive training and ongoing support.

Privacy is a factor that has been raised by some customers and the early pilot feedback on this service aspect is shaping our thinking for new pilot branches and, in the longer term, for our wider roll-out plans. The extended opening hours provided by the local branches are appreciated by our customers as they enable them to conduct Post Office transactions outside the traditional opening hours offered in branches. This has also helped reduce overall queuing times.

Working with Subpostmasters

In November 2011, subpostmasters had the opportunity to attend one of a series of joint Post Office Ltd and National Federation of Subpostmasters roadshows. Under the programme, subpostmasters could either;

  • express an interest in converting to a new style branch with support and investment, if the branch is suitable,
  • stay as they are,
  • express an interest in leaving the network, with a compensation package, subject to a suitable alternative provider being able to take on the service.

Subpostmasters have also responded to a recent survey undertaken by Post Office Ltd.  The feedback has been very positive, with a good level of interest in the new style branches.
 
In order to meet the Government’s commitment of no further programme of branch closures, if a subpostmaster wishes to leave the network with compensation, this can happen, but only once Post Office Ltd has found a suitable new subpostmaster and premises nearby.  Subpostmasters, who express an interest to leave the network, and where Post Office Ltd can find a suitable new operator nearby, will receive a compensation payment (equivalent to 18 months’ remuneration).  As the roll-out is phased and voluntary, it is not possible to provide in advance a list of branches that will convert to the new style models for specific locations.  Regular updates will be provided through both the pilot phase and during the three year roll-out programme.

Consultation and Communication

If the branch relocates to a new location then an agreed local public consultation exercise will take place ensuring that customers and external stakeholders are aware and have the opportunity to comment on the proposal for individual branches.  For on-site conversions, customers and local stakeholders will be advised in advance of the proposed change.

The Pilot Programme

Between now and summer 2012, around 50 further new local and main branches will be piloted across the UK.  New sites will complement current pilot branches and collectively help inform future roll-out plans.  Participation for existing operators is entirely voluntary.

In addition, Post Office Ltd will continue to offer the new models, where appropriate, to either attract new operators to restore service to communities that have previously seen their branch close or as a solution to ongoing network changes.

For more information, please contact:

Stuart Taylor,
Head of Post Office Relations  
Tel: 02920 392572
Mobile: 07715 480146
Email: stuart.taylor@postoffice.co.uk

Shane O’Riordain,
Communications Director 
Mobile: 07770 544585

Notes for Editors:

Some Network Key Numbers

1. Current Post Office Access Criteria

  • Current access criteria will remain and will ensure that;
    • 99 per cent of the UK population will remain within three miles of their nearest Post Office outlet,
    • 90 per cent of the UK population will remain within one mile of their nearest Post Office outlet,
    • 99 per cent of the UK population in Urban Deprived areas will remain within one mile of their nearest Post Office outlet,
    • 95 per cent of the UK population in Urban areas will remain within one  mile of their nearest Post Office outlet,
    • 95 per cent of the UK population in Rural areas will remain within three miles of their nearest Post Office outlet.

In addition, the following access criterion applies at a local level to ensure a minimum level of access for customers living in remote rural areas:

  • 95 per cent of the population of every postcode district to be within six miles of their nearest Post Office outlet.

2. Main Elements of the Network

  • Large Post Offices are typically located in town centres. 373 are “Crown” offices, directly owned and operated by Post Office Ltd, employing around 5,000 staff. Many other large Post Offices are operated by agents through a franchise or agency arrangement with another retailer such as WHSmith, the Co-op or Spar. These branches offer the full range of Post Office services over several counters.
  • Sub Post Offices make up the majority of the network. They are independent businesses run by subpostmasters alongside (in most cases) their private retail business.  There are over 9,000 subpostmasters running over 10,000 Post Offices.  Currently 97 per cent of branches in the UK are run by subpostmasters, working as agents on behalf of Post Office Ltd.
  • There are over 750 Outreach services, which ensure that communities are still able to access Post Office products and services where a traditional Post Office is not viable or practical. They take a variety of forms, including mobile Post Office vans and hosted services, for example in pubs and village halls.
  • The Post Office network also has a unique geographical reach: over half of Post Offices (55 per cent) are in rural areas, one third in urban areas and one tenth in urban deprived areas.

3. Key Facts About The New Models

  • Subpostmasters who convert to a main style branch will receive investment of up to £15,000, or up to £30,000 or up to £45,000, depending on the size of their branch.  Conversion to a main will see a change to subpostmaster remuneration, as this will be based solely on fully variable transaction fees rather than the current mix of fixed pay and transaction fees.  A number of these branches also need to have sufficient space to accommodate self-service equipment for customers such as Post and Go machines.
  • In the early pilots of these main branches, those that have been open for more than a year are reporting an average increase in Post Office customer visits of almost 4 per cent.  Where a main style branch has become established in new sites, agents are reporting increases in retail turnover of up to 8 per cent.
  • Subpostmasters who convert to a local style branch will receive investment of up to £10,000 for their branch.  Conversion to a local will see a change to subpostmaster remuneration, as it will be based solely on fully variable transaction fees rather than the current mix of fixed pay and transaction fees.
  • In the early pilot local branches that have been open for more than a year, the average increase in Post Office customer visits is almost 9 per cent,  while 22 per cent of customers are using Post Office branches outside traditional opening hours.  Where a local has become established in new sites, agents are reporting increases in retail turnover of up to 25 per cent.

3. Network Subsidy Numbers

  • Post Office Ltd has received a network subsidy since 2003, subject to State Aid  clearance by the European Commission.  The subsidy is used to support the infrastructure costs associated with loss-making branches.  These costs include;
    • cash and stock deliveries,
    • the provision, ongoing support and maintenance of the Horizon computer system,
    • a contribution to the agent’s fixed pay,
    • general product and marketing support.
  • The amount of network subsidy committed by Government over the life of the investment programme is referenced in the Department for Business, Innovation and Skills document, entitled ”Securing the Post Office Network in a Digital Age, November 2010.”

About Royal Mail plc
Royal Mail plc is the parent company of Royal Mail Group Limited, the leading provider of postal and delivery services in the UK and the UK’s designated universal postal service provider. UK Parcels, International and Letters (“UKPIL”) comprises the company’s UK and international parcels and letters delivery businesses operating under the “Royal Mail” and “Parcelforce Worldwide” brands. Through the Royal Mail Core Network, the company delivers a one-price-goes-anywhere service on a range of parcels and letters products. Royal Mail has the capability to deliver to more than 29 million addresses in the UK, six days a week (excluding UK public holidays). Parcelforce Worldwide operates a separate UK network which collects and delivers express parcels. Royal Mail also owns General Logistics Systems (GLS) which operates one of the largest ground-based, deferred parcel delivery networks in Europe.

 

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