Royal Mail has today submitted its proposal in response to Ofcom’s call for input into the Future of the Universal Service.

This follows the publication of Ofcom’s report in January 2024, which concluded that reform of the Universal Service is necessary given letter volumes have declined from a peak of 20 billion a year in 2004/5 to seven billion in 2022/3 and will likely drop to around four billion in the next five years.

Royal Mail’s proposal has been developed after listening to a wide range of businesses, consumers and stakeholders to ensure we meet changing needs and deliver a more efficient, more reliable and more financially sustainable service.

Under Royal Mail’s proposal, there will be no changes to:

• The one-price-goes-anywhere Universal Service to all parts of the United Kingdom
• First Class letters will be delivered daily, six days a week (Monday to Saturday). This recognises the importance of next day and Saturday letter deliveries, especially for the NHS and medical sectors, publishers and senders of greeting cards
• There will remain a choice of price and speed of service for customers, in First and Second-Class letters
• No change to the delivery speed for Access Economy Letters, which make up c 50% of all Access letter volumes

The proposal also includes vital changes to deliver a more efficient and financially sustainable Universal Service:

• All non-First Class letter deliveries would move to being delivered every other weekday (i.e. Monday to Friday)
• The delivery speed of Access Standard business and advertising mail would be aligned to Second Class, so they arrive within three weekdays instead of two currently.

It’s important to listen to what customers have told us about what is important. We’re calling on Ofcom to modernise the Universal Service for the digital age. We’re therefore proposing new, additional reliability targets for First Class and Second-Class USO services, alongside revised, realistic speed targets, to give customers further confidence.

The need for change

The Universal Service hasn’t changed for over 20 years, despite major changes to how people communicate. Royal Mail has been calling for reform of the Universal Service for more than four years. Ofcom calculates it costs us c£1 million - £2 million every day to provide the Universal Service to the UK. This is in the context of Royal Mail posting losses of £419 million in 2022-23 and £319 million for the first six months of 2023-24. The Universal Service faces a real, urgent financial sustainability challenge.

A more sustainable future

Our proposal closely aligns to changes successfully made in comparable countries in Europe and around the world over recent years, taking learnings from those postal operators who have reformed.

Our proposal has limited change for customers and reform can be achieved with regulatory change without the need for changes to legislation.

If fully and swiftly implemented, this would reduce the net cost of the Universal Service by up to £300 million per year. But this is very dependent on how quickly reform is enacted and the rate of letter decline.

These savings would allow Royal Mail to continue to invest in the modernisation and transformation of the business to provide products and services that our customers want and reduce our environmental impact.

The proposal is designed to create a more financially stable future for the business and our customers, protecting tens of thousands of jobs and the best terms and conditions in the industry.

As a result of the changes creating a more efficient network, posties would deliver to seven out of ten addresses on every walk, compared to just four out of ten today. This would mean a net reduction in daily delivery routes of 7,000-9,000 over the course of 18-24 months. The company expects there to be no compulsory redundancies and fewer than 1,000 voluntary redundancies.

Royal Mail is urgently calling for Ofcom to act faster on implementing change, with the introduction of new regulations by April 2025 at the latest.