IDS proposes axing some daily Royal Mail services
By Josh White
Date: Wednesday 03 Apr 2024
(Sharecast News) - International Distributions Services proposed an end to daily Second Class deliveries by Royal Mail on Wednesday, in its submission to Ofcom on the future of the Universal Service, in a bid to save up to £300m per year.
The FTSE 250 company said the response came in light of Ofcom's conclusion that Universal Service reform was needed, due to a significant decline in letter volumes over recent years.
It said Royal Mail's proposal, developed after extensive consultation with various stakeholders, aimed to address evolving customer needs while ensuring the efficiency, reliability, and financial sustainability of the service.
Key elements of the proposal included maintaining the one-price-goes-anywhere service across the UK, and retaining daily First Class letter deliveries, six days a week, acknowledging the significance of next-day and Saturday deliveries, particularly for essential sectors such as the NHS, publishers, and greeting card senders.
Furthermore, the proposal offered customers the choice between First Class and Second Class services, and continued parcel deliveries seven days a week.
To enhance efficiency and financial sustainability, Royal Mail proposed adjustments such as delivering non-First Class letter items, including Second Class, every other weekday, and aligning the delivery speed of standard bulk business mail to Second Class standards, ensuring arrival within three weekdays.
Royal Mail was also seeking to modernise the Universal Service for the digital age by introducing new reliability targets for First Class and Second Class services, along with realistic speed targets, to instil further confidence in customers.
Additionally, in response to customer demand, tracking would be added to Universal Service parcels.
IDS said its proposed reforms could be implemented through regulatory changes, bypassing the need for legislation.
It also stressed urgency, with Royal Mail calling on Ofcom to expedite the implementation of new regulations by April next year at the latest.
"The fact that letter volumes have dropped from 20 billion to seven billion a year means that the Universal Service is now unsustainable," said IDS group chief executive officer Martin Seidenberg.
"If we want to save the Universal Service, we have to change the Universal Service.
"Reform gives us a fighting chance and will help us on the path to sustainability."
Seidenberg said the company's proposal was based on the opinions of thousands across the UK, to ensure it met the public's needs.
"We have worked hard to come up with a proposal that is good for our customers, good for our people and would allow Royal Mail to invest in products and services that the UK wants.
"We have serious concerns that the urgency of the situation is not properly recognised by Ofcom.
"With no need for legislation there is no need to wait."
At 0947 BST, shares in International Distributions Services were up 1.06% at 229p.
Reporting by Josh White for Sharecast.com.
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