Industry fears that direct mail clients will be hit by soaring price rises – and potentially quit the sector in droves – have been realised after Ofcom gave Royal Mail the green light to set its own prices today.
The move, published in Ofcom’s 251-page ‘Securing the Universal Service’ report, also raises the prospect of new battles with rivals over ‘final mile’ delivery, with Royal Mail being allowed to set its charges for this activity too.
Only second class post – both letters and small parcels – have been subject to a price cap. Over the next seven years, second class stamps can rise no higher than 55p. However, the price for first class stamps and most business mail products will be set by Royal Mail without any need to refer to Ofcom.
Criticism of the plans has been widespread, with both consumer groups and businesses fearing the worst. The DMA has also expressed fears that it could trigger a mass exodus from direct mail as brand owners speed up their adoption of cheaper digital alternatives.
The decision has already been approved by MPs, although some observers claim this is because they were hoodwinked that the future of the Universal Service – a major political issue – hinged on the lifting of price controls.
The recommendation was made despite an admission by Royal Mail boss Moya Greene that prices for advertising mail could rise by another 20% on top of the 20% VAT some firms will be hit with.
Revealing the new regulatory framework, Ofcom group director of competition Stuart McIntosh said: “Ofcom’s decisions are designed to safeguard the UK’s postal service, ensuring it is sustainable, affordable and high-quality, to the end of the decade and beyond.
“The measures ensure that Royal Mail’s products remain affordable for vulnerable consumers and small businesses.”
Industry groups, including the DMA, the Mail Users’ Association (MUA) and the Mail Competition Forum, took part in the consultation, although MUA chief Alan Halfacre has already urged MPs to scrap the Universal Service as the group claims it is unsustainable.
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