Royal Mail: Universal Service under threat

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One of the promises made by the Government at the privatisation of Royal Mail late last year for a knock down price was that the universal service and six days a week delivery would be safe-guarded.

And only a year later, it seems that both are under threat. Royal Mail posted some poor results and diminished profits yesterday and that has not only hit the share price but also seen Royal Mail raise the question (albeit obliquely) that they would like to be released from these requirements or see them also applied to competitors such as Whistl.

Here’s the comment from Royal Mail that has caused alarm:

“We believe the current regulatory framework does not fully address the problem posed by unfettered direct delivery competition. We think there is an urgent need for a new framework that will secure the sustainable provision of the Universal Service for the future.”

Of course, sceptics said at the time that there was a very real risk to the universal service that ensures delivery of post to all parts of the UK for the same rates. But it was a quid pro quo for the commercial freedom that Royal Mail claimed it could only enjoy if privatised. Now it seems that they want the goal posts moved.

Any such end to the universal service would be a real blow to ecommerce and a real problem for those who live in remote and rural areas who really depend on the Royal Mail.

21 Responses

  1. This is a total disgrace from Royal Mail.

    The reason their profits are down is due to a commercial miscalculation in overpricing their parcels.

    They’ve had to climb down with a temporary price drop until Xmas.

    The real story here is the greed and ineptitude of R M management.

    Any supposed threat to the universal service must be snuffed out at once by politicians of all parties.

    The point of privatisation was that R M would be subject to commercial competition.

    So if Moya whats-here-name is now complaining that the competition is too tough, she can fly back to Canada!

  2. I live in the Orkney Islands and both my husband and myself run e commerce businesses. We told everyone who we could get to listen that this would happen once RM was privatised.

    But we were repeatedly told that the universal service was protected by law and would be preserved. I take no pleasure in being proven right and worry even more about the future of our family.

  3. Sue

    Unfortunately the reality of a competitive world means that Royal Mail needed to be privatised regardless. The USO can be seen as an uncommercial benefit for people and businesses like yourself but shouldn’t have impeded a decision to privatise RM.

    RM had been badly runs for years now, a lack of competition and being in public hands has made it lazy and inefficient and it is only normal and expected that fast heeled rivals in the private sector have begun to chip away at RMs business. This is a good thing services will improve, prices will better reflect the market.

    What the USO does is subsidise rural businesses and homes at the expense of the majority. You already have to pay more to travel (to and fro to get to things) so I don’t see why you believe you should be subsidised for mail as well.

    Online retail is such a fast growing and important part of the economy that market forces should be allowed to take their course.

    That being said secretly I hope the USO remains in place for a while and only because I want to see RM competitors get one up on RM to help break their monopoly over the letter and small parcel market. The faster this happens the better for all of us and USO will help speed that along (in the short term). NOT because I think it’s a viable or competitive long term option

  4. The cheap sell off was outrageous, but the loss of the Universal Service was inevitable post-privatisation – did anyone believe it was safe? Bad news for Scotland/Wales/rural areas/e-commerce sellers.

    Strip them of the “Royal” title and treat them the same as the hideous Throw-It-Over-The-Back-Fence Yodel. Shame, I’ve got great RM posties.

  5. James seems to be a “true believer” in the almost mystical powers of The Market. A knowledge of economic history will show that Britain, the United States and China (and other economies) became the leading economies of their day under strong protectionist policies and subsidies.

    Regarding the post/mail, someone in China can send a small parcel to my UK town for far less than I can. Last month I bought a key ring from Hong Kong for 99p including postage. And UK ecommerce is expected to compete with this?

    I fail to see how breaking the Universal Service will improve the UK’s business infrastructure and help us to compete for our own market and internationally.

  6. i really dont understand how Royal Mail NEEDED to be privatised, i dont really understand why anything needs to be privatised. everyone seems to be under the impression that publically owned = inefficient and badly run. why? perhaps it was inefficient and badly run i dont know, you dont need to sell it to fix it. just fix it.

    our energy prices have all gone up, not down.
    the train fares all increased tenfold, dont think service improved much more than it would have.
    bus fares increased tenfold, with many rural areas cut out or cut down in service, now its really only the main routes get a ‘proper’ service.

    okay so now some individual is making profit from us, instead of any proceeds being re-invested in the service, or going to the nations coffers. how is this better?

    to be honest i think a lot of these things are run into the ground on purpose, just so the government can pawn it off for some quick cash. less objections if its a money-loser when its sold. (not that they care if we object, we did, they sold it anyway.)

    and we’re told prices will improve, like the trains and gas and electricity and…. we know they won’t. they cant. Royal Mail ships from one end of the country to the other quickly and effeciently, for 50p. and for anyone, not just big-contracts; old Mrs Murphy who’s 92 and only buys a stamp once a year to send a birthday card can still send it hundreds of miles away for 50p. Please do tell me that she’ll be able to do so for less than 50p after privitisation? no? didnt think so.
    – in fact she’ll probably need to open a membership with yearly subscription, book the stamp three months in advance, and only be able to use it between certain times, in order to qualify for the base rate, otherwise for a 1-off over the counter anytime nationwide stamp? that’ll be £3.95 thanks.

  7. if the USA ,Australia, Canada , and a dozen other bigger countries with remote community’s can manage why cant we?

  8. Those who proclaim the wonder of markets should look at the banking crisis, which led to massive subsidies to the banks, as well as the finance industry as whole, due to the emperors new clothes economics being played out. Those in the city have and are aware of the ability of the state to underwrite and therefore subsidise the financial institutions in the city of London etc. and therefore protect there wealthy investors. The true market argument would have allowed for the failure of these institutions (remember those involved the crash new Govt’s would never allow them to fail so never worried) without the fail safe of state intervention, this in turn would have led to wealthy investors losing all, runs on banks without the provision of state backed insured deposits to the value of, and indeed the possible collapse and value of currencies , aka Germany in the 30’s.
    Money is after all is just a symbol of trade or tokens of valuing products.And is frequently dependent on state intervention and subsides hence the protectionism in Japan and the common market in the 70’s & 80’s allowing European countries and Japan to build up so called wealthy economies’ . No surprise that since these protections have been removed that their economies and the subsequent demise of manufacturing trade balances have weakened their economies.
    With regard to Royal Mail, the shares were deliberately undersold so that the large financial hedge & wealth funds etc. Would buy, pushing up the price and therefore allowing the Company to be valued as a top 100 FTSE Co, once the Company entered this Market, Pension Hedge funds etc. are compelled to buy, mostly from the institutions which were subsidised by the state with undervalued shares! once again financial institutions were subsidised and protected within the market by the state.
    Finally,
    The Problem Royal Mail has is with the regulator – again an institution which should not exist in a free market. However regulation is being imposed only on the Royal Mail via the USO legislature terms. The regulator is however failing in its duty to protect the USO by allowing whistl (ex TnT) to cherry pick the profitable urban areas only,and operate outside the 6 delivery day week to addresses as per USO terms (Whistl delivers every other day over 6 days) . Indeed recent press releases by whistl then TnT clearly pitched the efficiency model argument (a simplistic value that fails to recognise the true parameters of the USO efficiency) proclaimed by OFCOM. This was a press release which spouted efficiency from a Company that operates in the USO market without the need to produce efficiency targets!, unlike Royal Mail why – FiFaisms maybe in play.
    If Royal Mail was allowed to operate freely in the market without the restrictions placed on it by OFCOM the regulator then it would prosper, Royal Mail would also prosper if those terms of regulation were correctly and equally enforced on Letter Mail operators such as Whistl. A level playing field will ensure that a socially responsible organisation (hopefully) will be able to continue to provide a necessary service to many of the nations SME’s that are the back bone of this countries real market economy.
    However the European Union maybe about to once again impose so called free market ideologies that will reduce the requirements of the USO agreed by the parliamentary legislation.
    As always many who speak of the free market, speak with forked tongue.

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