Royal Mail is on the brink. Cutting letter deliveries to 3 days a week could save it

Ofcom, the UK regulator overseeing the postal service, published proposals to rescue the beleaguered company Wednesday. It said Royal Mail could save as much as £650 million ($828 million) a year if it cut letter deliveries to three days a week from the current six.

The company’s business model is “getting out of date” and risks becoming “unsustainable” as people send fewer letters and receive more parcels, Ofcom said.

The number of letters sent via the Royal Mail network had halved since 2011, and financial losses have ballooned.

Among its other proposals, Ofcom suggested that Royal Mail could save up to £200 million ($255 million) a year by cutting its letter deliveries down to five days a week, or by extending the time it takes to get mail to customers.

“Something’s got to give, or the service is going to be too costly, and either stamp prices will go up or it will become unsustainable,” Melanie Dawes, Ofcom’s chief executive, said in an interview with the BBC Wednesday.

Any changes to Royal Mail’s Monday-Saturday letter delivery schedule would need to be approved by lawmakers because the company’s service obligations are set out in legislation. It delivers parcels five days a week, Monday to Friday.

Kevin Hollinrake, the United Kingdom’s postal services minister, told the BBC Wednesday that it was important to maintain a six-day service, and that Saturday deliveries were “sacrosanct,” in part, because many businesses, such as those producing magazines and greeting cards, required deliveries over the weekend.

No longer sustainable

Ofcom said Royal Mail was not currently providing a “reliable service” and change was urgently needed, a view shared by the company’s parent — International Distribution Services (IDS).

“It is not sustainable to maintain a network built for 20 billion letters when we are now only delivering 7 billion,” IDS CEO Martin Seidenberg told CNN in a statement.

The regulator fined the company, which was owned by the UK government until its privatization around a decade ago, £5.6 million ($7 million) last year for failing to deliver mail on time.

At the time, Ofcom said the pandemic had significantly hampered Royal Mail’s operations, but that the firm could “no longer use that as an excuse” for poor performance.

Royal Mail reported an operating loss of £319 million ($407 million) in the six months to the end of September, up 46% from the loss it recorded during the same period a year earlier. Its parent company, International Distribution Services, said low revenues and the cost of a pay deal agreed with a major postal workers’ union were behind the loss.

Ofcom said its proposals were meant to start a “national discussion” about the future of Royal Mail — an institution that is more than 500 years old — and that it would hold events in the next few months with individuals and businesses to ask for feedback.

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