Royal Mail has been whacked with a £5.6m fine for failing to meet its First and Second Class delivery targets, with regulator Ofcom maintaining it will continue to hold the company to account to make sure it improves service levels and takes its responsibilities more seriously.
Under Ofcom’s rules, each year Royal Mail is required to deliver 93% of First Class mail within one working day and 98.5% of Second Class mail within three working days, and complete 99.9% of delivery routes for each day on which a delivery is required.
In 2022/23, Royal Mail’s reported performance results showed that it had only delivered 73.7% of First Class mail on time and 90.7% of Second Class mail on time, and completed 89.35% of delivery routes for each day on which a delivery was required.
Even after adjusting Royal Mail’s performance for the impact of industrial action, extreme weather and the Stansted runway closure, its First and Second Class performance was still only 82% and 95.5% respectively.
Ofcom said Royal Mail had breached its obligations by missing targets “by a significant and unexplained margin”, which caused “considerable harm” to customers, and Royal Mail did not take sufficient action to prevent it.
The penalty includes a 30% reduction which reflects Royal Mail’s admissions of liability and its agreement to settle the case. The financial penalty is payable to HM Treasury within two months.
Ofcom director of enforcement Ian Strawhorne said: “Royal Mail’s role in our lives carries huge responsibility and we know from our research that customers value reliability and consistency.
“Clearly, the pandemic had a significant impact on Royal Mail’s operations in previous years. But we warned the company it could no longer use that as an excuse, and it just hasn’t got things back on track since.
“The company’s let consumers down, and today’s fine should act as a wake-up call – it must take its responsibilities more seriously. We’ll continue to hold Royal Mail to account to make sure it improves service levels.”
As part of its investigation, Ofcom also considered concerns about how parcels and letters might be prioritised for delivery.
But the regulator said it did not identify any suggestion that Royal Mail’s senior management had directed the prioritisation of parcels over letters outside of recognised contingency plans, such as during the pandemic and during the industrial action in 2022/23.
Even so, Ofcom said it was concerned that Royal Mail appears to have insufficient control, visibility and oversight over local decision-making at certain delivery offices where high absence and vacancies may have led to customer operations managers – who are responsible for individual delivery offices – making “on the day” decisions about what to deliver.
Given ongoing high absence and vacancies, and delays in bringing service levels back up, the regulator is concerned about the operation of delivery offices, which it views as fundamental to Royal Mail meeting its delivery targets.
Ofcom added: “Royal Mail must ensure its customer operations managers are provided with appropriate training, so they are equipped to make such decisions. We will be keeping a close eye on the company’s performance this year, and the steps it is taking to return delivery offices to pre-Covid practices.”
In response, a Royal Mail spokesperson said: “We are very disappointed with our quality of service performance in 2022-23 and acknowledge Ofcom’s decision today.
“Last year was uniquely challenging for Royal Mail. Quality of service was materially impacted by the long-running industrial dispute which included 18 days of strike action.
“Quality of service is extremely important to us. We take our commitment to delivering a high level of service seriously and are taking action to introduce measures to restore quality of service to the level our customers expect.”
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