Royal Mail may stop second class Saturday post

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The UK communications regulator is set to give Royal Mail permission to end Saturday deliveries of second-class mail, part of a package of changes the regulator says are essential to getting the system “back on track”.

Ofcom has been investigating Royal Mail’s Universal Service Obligation (USO) since January, the duty to provide the same service to every address in the UK for the same price.

On Thursday, the regulator said it had largely accepted one of the delivery firm’s own proposals not to have to deliver second-class items on Saturdays. Second-class items would instead be delivered on three or five working days a week, Royal Mail has proposed. First-class deliveries would continue to be made six days a week.

“If second class letters continued to be delivered within three working days, but not on Saturdays, and first class remained unchanged at six days a week, Royal Mail could improve reliability, make substantial efficiencies and savings, and redeploy its existing resources to growth areas such as parcels,” Ofcom said in a statement.

The regulator added that “further in-depth research” will now be conducted among postal users to determine whether the proposed option meets their needs.

Ofcom has launched a review of the USO to assess the viability of Royal Mail, which has seen annual letter deliveries fall from 20 billion to just 6.7 billion over the past two decades.

International Distribution Services, the company’s parent company, said Royal Mail made an operating loss of £348m in the year to March this year. Ofcom has estimated that meeting current universal service obligations is costing Royal Mail between £325m and £675m a year in lost profits.

Royal Mail has argued that it can only return to profitability if its current requirement to deliver second class mail six days a week is scaled back. Royal Mail was privatised between 2013 and 2015. The board of International Distributions Service recommended a takeover bid from Czech billionaire Daniel Křetínský in May, valuing the company, which also owns Netherlands-based GLS and Royal Mail, at £5.3bn.

Any changes will only come into effect after Ofcom has made a final decision, which is scheduled for summer next year.

The plans to restrict second-class deliveries have angered groups including the greetings card industry and magazine publishers, both of whom have said the slow and unreliable delivery is damaging their businesses.

However, Ofcom’s Lindsey Fussell insisted the regulator wanted to ensure it achieved “the best outcome for consumers”.

“We are now looking at whether we can restore universal service provision in a way that meets people’s needs,” she said.

She stressed that the outcome would not be a “carte blanche” for the traditional postal operator.

“In any scenario, it needs to invest in its network, become more efficient and improve its service levels,” she said.

Martin Seidenberg, CEO of International Distribution Services, said Royal Mail faced “a very real and urgent challenge around financial sustainability”.

“Change cannot come soon enough,” he added.