The direct marketing industry has slammed Coalition plans to inject nearly £10bn into Royal Mail to make it more attractive to private investors, warning that brand owners will ultimately foot the bill.
The measures – including writing off £1.7bn of debt and the £8bn pension deficit – were included in the final reading of the Postal Services Bill, which passed through Parliament late last week.
But the DMA believes the move will ultimately lead to price increases for commercial mailers.
Alex Walsh, head of postal affairs for the DMA, said: “While the new legislation will render Royal Mail a more attractive proposition for interested investors, we’re concerned that competition will suffer.
“There’s also no incentive for Royal Mail to improve efficiencies or cut costs. So, it’s highly likely that commercial mailers will be saddled with price increases along the line.
“This year alone we’ve seen a 15% hike in mailing costs. Increasing prices further will undoubtedly lead to many companies shying away from using mail to communicate with consumers and withdrawing business from Royal Mail, which it can ill afford to lose.”
For the additional financial support to be provided, the Government needs to get approval from the European Commission, and will submit a formal state aid notification in the next few days. It hopes that the process will be completed by March 2012.
