The cost of sending a first-class letter in the UK is about to get more expensive. Starting from October 7th, Royal Mail will raise the price of first-class stamps by 30p, bringing the new cost to £1.65. The price for second-class stamps will stay the same at 85p. This increase comes as the company faces serious financial challenges, mainly due to fewer people sending letters and the rising costs of running the postal service.

Why the Price Hike?

Royal Mail has explained that fewer people are sending letters now compared to the past, which means it costs more to deliver each letter. Nick Landon, the company’s chief commercial officer, said, “We always think carefully about raising prices, but with letter volumes dropping by two-thirds from their peak, the cost of delivering each letter naturally goes up.” In other words, with fewer letters to deliver, the costs for each one rise. The company is also dealing with higher business expenses to maintain its universal service, which guarantees the same price for delivering letters anywhere in the UK.

Changes Needed in Mail Delivery Rules

Royal Mail is asking for changes to its service rules, which currently require them to deliver letters six days a week, from Monday to Saturday, and parcels from Monday to Friday. They believe these rules are outdated and need to be adjusted to better fit how people communicate today. The company argues that while letter deliveries have dropped significantly, parcel deliveries have increased and are more profitable.

The UK’s postal regulator, Ofcom, is also looking into whether these rules should change. On Thursday, they said they might allow Royal Mail to stop delivering second-class letters on Saturdays. Ofcom is even considering letting second-class deliveries happen only on alternate weekdays, which could help Royal Mail save money.

Uncertainty Over Reforms

However, Royal Mail has stated that they still do not have a clear answer on whether these changes will happen. The company has been saying for years that the universal service needs urgent reform. The basic requirements for this service haven’t changed for more than 20 years, even though the way people communicate has changed a lot during that time. With fewer letters being posted and more people opting for emails and digital messaging, the company finds it challenging to keep up with the costs of the old rules.

Decline in Letter Deliveries

The drop in the number of letters being sent is staggering. Royal Mail says that in 2004-05, around 20 billion letters were posted annually. Now, in 2023-24, that number has fallen to about 6.7 billion. The average household used to get around 14 letters a week, but now they only get about four. With this significant decline in letter volumes, the company reported a loss of £419 million last year, despite an increase in parcel deliveries and several stamp price hikes in recent years.

Service Quality Concerns

Royal Mail’s performance has also been a concern. Many customers have complained about not receiving important letters, like medical appointment notifications and legal documents, on time. This poor performance further highlights the need for changes in how the postal service operates.

Potential Cost-Saving Measures

Royal Mail has estimated that by changing the rules for second-class services and adjusting its performance targets, the company could save around £300 million a year. They have proposed cutting second-class mail deliveries on Saturdays and even suggested alternate weekday deliveries, both of which are being looked at by Ofcom. However, changing the days on which mail is delivered would require new legislation from the government and parliament.

What’s Next for Royal Mail?

Ofcom has made it clear that no final decisions have been made regarding these reforms. They plan to launch a consultation early next year and expect to make a decision by the summer. Until then, Royal Mail continues to face financial difficulties and is looking for ways to remain sustainable.

New Ownership and Future Changes

Meanwhile, Royal Mail’s parent company, International Distribution Services, is in the process of being bought by Czech billionaire Daniel Kretinsky for £3.57 billion. Mr. Kretinsky has promised to keep the universal service obligation, but only for the next five years. The takeover is set to undergo a government investigation, including checks on any possible connections to Russia.