Royal Mail delivers - for big business only

Big business is the surprise benefactor of competition in the postal market, according to a new report.

Last Updated: 31 Aug 2010
The end of the Royal Mail’s 350-year monopoly in 2006 has seen a boom in competition in the bulk mail business, with a consequent lowering of prices and (arguably) improvement in service offered to large organisations. That sounds suspiciously like good news for a change.

But remember, this is the post we’re talking about. Big firms may be better off but they are the only ones with anything to smile about. The report - from DBERR, as we must now call the DTI – has concluded that neither small businesses nor private individuals have seen any improvement from the liberalisation of the market. Which comes as no surprise to any of us – it’s hard to interpret later deliveries, fewer collections and local post offices closing in their hundreds as anything but bad news from a customer service perspective.

So bad have things got, says the report – whose full findings are due later this year – that the current situation is ‘not tenable’ as it threatens the financial stability of the Royal Mail and thus the viability of the ‘universal service’. That’s delivery to and collection from every address in the UK, no matter how remote or Rottweiler-ridden, as currently provided by the Royal Mail.

Given that this is all coming form a government-appointed panel (the same government which opened up the market in the first place, remember) it is pretty strong stuff. But surely hardly surprising? Given that the very-expensive-to-provide universal service has only historically been maintained through cross-subsidy from the Royal Mail’s lucrative monopoly on business post, it was pretty much inevitable that things would start to get strained when the introduction of competition in bulk mail drove prices and profits down.

The report also notes disapprovingly the absence of competition faced by the Royal Mail over the ‘last mile’ - the final stage of delivery. Of course this is true, but you don’t have to be a Nobel-winning economist to figure out why. Delivering thank-you letters to Aunt Flo and postal orders to little Jimmy is not a very attractive or profitable business to be in, so commercial operators are quite happy to leave that to the Royal Mail.

Here at MT we wouldn’t like anyone to get the idea that we are apologists for the Royal Mail, an organisation whose manifest problems we have examined at length and with some relish here in the past. But the kind of muddled official thinking that this report is indicative of certainly doesn’t help. Either the mail is a public service to be maintained, if necessary through subsidy, or it is not. In which case it should be allowed to sink or swim on a fully commercial footing. Trying to force it to be both at the same time is, and will remain, a recipe for disaster.

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