Royal Mail fined for missed targets but ducks Covid slap

royal_mail1Royal Mail has been delivered a further blow to its finances after being whacked with a £1.5m for failing to meet first class delivery targets and a further £100,000 for overcharging customers buying second-class stamps.

The postal giant is required by Ofcom to deliver at least 93% of first class post – across the UK – within one working day of collection. In 2018/19, 91.5% of first class mail was delivered on time.

In a statement, the regulator said Royal Mail had not provided “a satisfactory” explanation for the shortfall, having simply blamed the impact of Highways England’s road investment programme. The company also failed to take sufficient steps to get back on track during the year, earning it a £1.5m monetary penalty.

However, Ofcom reported that Royal Mail’s performance did improve in 2019/20, after taking into account the early impact of Covid-19, and met its regulatory obligations in the financial year to March 31 2020.

Even so, the regulator topped up the fine with a £100,000 penalty for a major balls-up which led to the company overcharging customers for second class stamps between March 25 and March 31 last year.

A 60p price cap was in force until March 31 but Royal Mail increased the price of second-class stamps to 61p a week early on March 25. This meant customers were overcharged over the course of a week, with estimates suggesting it brought in £60,000 of extra revenue as a result, which it is now unable to refund.

Ofcom director of investigations and enforcement Gaucho Rasmussen said: “Many people depend on postal services, and our rules are there to ensure they get a good service, at an affordable price. Royal Mail let its customers down, and these fines should serve as a reminder that we’ll take action when companies fall short.”

The fines will go to the Treasury.

In response to the move, Royal Mail insisted it was “disappointed” with its performance and “accepts and understands Ofcom’s decision”.

It said: “We are pleased Ofcom has taken into account the unprecedented impact of the coronavirus pandemic on our operation when assessing our 2019/20 first class quality of service performance. We worked hard to restore our service quality in 2019/20 and, were it not for the pandemic and its impact on our business in the latter half of March, we were on course to deliver the requisite first class regulated quality of service target (93%).

“Despite our best endeavours, some areas of the UK experienced a reduction in service levels during March. Relevant factors included high levels of coronavirus-related absences and necessary social distancing measures.

“We accept and note Ofcom’s decision around the 2019 second class price cap. We made a mistake. Due to an error on our part, our price for second class stamps was 1p above the requisite regulatory cap for seven days. At the time, we sought to put this error right by publicly acknowledging our mistake.”

Royal Mail added it donated the £60,000 revenue to charity Action for Children which helps young people at risk of developing mental health problems.

Last month, Royal Mail’s efforts to promote direct mail during the Covid-19 lockdown were branded “too little, too late” after postal giant’s annual results revealed it had suffered a “disastrous” 63% crash in advertising mail volumes.

Overall, in the year to March 31 group sales were up £259m to £10.84bn but operating profit slumped by £124m to £217m. Royal Mail now plans to axe 2,000 management jobs, with marketing, IT and finance roles in the firing line.

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