The UK’s communications regulator Ofcom has opened an investigation into Royal Mail’s underperformance in 2023/2024 following the publication of the company’s results on May 24.
Royal Mail failed to meet its delivery targets, which are set by Ofcom and include delivering 93% of First Class mail within one working day of collection and 98.5% of Second Class mail within three working days of collection.
The operator reported performance of 74.5% and 92.4% when it came to First and Second Class mail respectively in the 2023/2024 financial year.
According to Ofcom, it is now deciding whether the company is in breach of its obligations and will consider if there were any exceptional events beyond the company’s control that may have explained why it missed its targets.
“If it does not provide a satisfactory explanation and we determine that Royal Mail has failed to comply with its obligations, we will consider whether to impose a financial penalty,” Ofcom stated on its website.
Royal Mail has been fined by Ofcom several times in recent years for failing to meet its First and Second Class mail delivery targets, including £5.6m (US$7.1m) in 2022/2023 and £1.5m (US$1.9m) in 2018/2019.
Universal service reform
Commenting on the 2023/2024 financial results, Martin Seidenberg, CEO of International Distribution Services (IDS) which owns Royal Mail, said, “In the last six months we have set Royal Mail on the right trajectory. We made good progress delivering our modernization agenda and returned to growth in the second half. We have improved quality, won back customers lost during industrial action, controlled costs and delivered Christmas for our customers. Positive momentum is building, although there is hard work in front of us to get back to profitability.”
However, the postal operator is calling for Ofcom and the UK government to reform the universal service obligation (USO), which currently requires Royal Mail to deliver mail to every household six days a week. Royal Mail has stated this is no longer feasible in the modern world, and has proposed changes to the USO to enable it to improve its service.
“The transformation of Royal Mail must be supported by universal service reform,” Seidenberg added. “Our proposal to Ofcom would deliver a more efficient, more reliable and more financially sustainable service, while protecting what matters most to customers. The need for reform is urgent and these changes, which do not require legislative change, should be enacted quickly by Ofcom. They just need to get on with it.”
Read more about how the USO is changing across the postal industry in the March 2024 issue of Parcel and Postal Technology International.
