Association urges members to contact MPs over Royal Mail’s delivery cut plans
Royal Mail’s presentation at Thursday’s GCA conference has led directly to a new letter for members of the greeting card community to download and send to their MP demanding government action to save the 508-year-old delivery service.
Taken from RM’s head of public affairs Fiona Hamilton’s comments, the letter raises the fact that Ofcom has accepted Royal Mail’s plan to slash second-class deliveries to just two or three days a week, the delivery company’s determination to abandon the letters and cards side to chase parcels business, that the division of costs is unclear despite both sharing considerable elements of the same delivery network, and that the business is still failing to meet its legally-binding delivery targets while giving executives runaway pay and bonuses.
Fiona was quoting from the notes provided by David Gold, director of external affairs and policy, who was supposed to be the keynote speaker at the GCA AGM & Conference at Bristol’s Harbour Hotel on Thursday, 19 September but, due to family issues, cancelled the day before, which meant that the promised Q&A session became all questions with few answers.
Since the conference, GCA CEO Amanda Fergusson and council member and Cardology director David Falkner, who leads the RM sub-committee, have been working with the association’s PR firm Arena.
“We’ve met to review the conference and our campaign plans.” Amanda explained, “and been working on this letter that members can download and send to their MP.
“We need to encourage everyone to download the letter – headed ‘urgent concern about Royal Mail price increases and the future of our affordable postal service’ – and write to their MPs to highlight the issues we are concerned about and which members raised at the conference.”
The concerns echo those expressed by Communications Workers’ Union secretary Dave Ward during his speech to the Labour Party conference yesterday, 23 September, on Czech billionaire Daniel Křetínský and the Royal Mail takeover bid.
The full transcript of Fiona’s presentation at Thursday’s GCA Conference & AGM and the Q&A session is below:
Fiona Hamilton, Royal Mail
“It’s a real pleasure to be speaking to you all today here, and David sends his apologies. He was looking forward to being here nonetheless, when we caught up last night, he was really keen to impress upon me the importance of being here and having this open dialogue between Royal Mail and the greeting cards industry.
“And it’s really great to see so many people here in Bristol. So, I’ll do my best to convey what David wanted to convey to you here today.
“Let me start with Royal Mail and the Greeting Card Association and our shared ambition. I’m very conscious of the importance of the greeting card industry. As a child, my aunt had a greeting card shop. I grew up kind of close to the industry, and I will be going home and posting some cards for Thinking Of You Week.
“I know that sending a greeting card says a hell of a lot more than an email or a text message. And I also recognise how key Royal Mail is to your future.
“I appreciate that it’s been a difficult few years. Like others, including ourselves, the economic climate has been and continues to be challenging. We lost £419million in 2022-2023 and £348m in 23-24.
“Yes, we made good progress on delivering our modernisation agenda and returning to growth in the second half of 23-24 but there is still a lot of hard work for us to do to get back to profitability, and no guarantees.
“You’ve got strong representation in Amanda and David Faulkner, David and I have met Amanda and David a number of times, and I think it’s really important that we have an open dialogue around the need for change.
“I think if David were here today, he would say the same as I do. We hear your concerns around affordability, reliability, loud and clear. We know you want us to do better. We know you want to see a strong Royal Mail that continues to deliver to every address across the country, and we know quality of service is a concern, and we know you’re worried about pricing, and I will address these points in due course.
“But let me start with some of the real challenges we face and the efforts we are making to meet those challenges head on.
“Let me start with where Royal Mail has got to today. I appreciate it was over a year ago, but if you want to look at where we are today, you’ve got to look back over the period of industrial action, the 18 months of the dispute following the pandemic.
“As I said, I acknowledge it was a difficult period for you and for people sending greeting cards through the post. But we turned a corner with the business recovery, transformation and growth agreement with the Communication Workers’ Union, that’s the union that represents our post men and women, in July last year.
“What we secured was an agreement about changing the ways of working as much as it was about pay and actually, from the company perspective, it was the changing ways of working that were the more important part of the dispute. It’s also the change part that’s important to you as customers, because it’s about adapting our working practices to better meet changing customer demands.
“To give just one example, one of the things that we pushed for in that agreement was seasonal working. So that means that post men and women work fewer hours in the summer and more hours at Christmas when it’s busier. It means we can better respond to the decline in letters down from 20billion at the peak in 2004-05 to 6.7bn today, and the increase in parcels, and it means that we can improve our quality of service if we can flex our workforce as needed.
“Since the agreement, we’ve been working with both our unions to implement the changes, and we’re now starting to see those improvements come through. We’re focused on restoring faith in the fact that Royal Mail can deliver. We launched a major recruitment drive and put in place better support for those areas where there were challenges.
“We knew that the big test after reaching that agreement with our union was whether or not we could deliver Christmas.
“For Christmas 2023 we invested heavily over recruitment of both permanent and temporary workforce, hired more vehicles and hired extra space. Key for us at Christmas is actually the ability to deliver, to scale up the operations so that we can handle the additional volume.
“And, above all, we ran a major campaign internally to restore pride in our people working for Royal Mail and to remind them of the importance of what we do and why the country relies on us to deliver Christmas cards and gifts.
“I want to show you a video that was part of that campaign, because I think it really speaks to what we do at Royal Mail – it ends ‘Royal Mail has been delivering Christmas for 500 years. If it was easy, everyone would do it. Let’s deliver a great Christmas for everyone. Royal Mail. We are Christmas.’
“I really like that video, it was designed to speak to our people and to restore that sense of pride in what we do – that’s all 130,000 of our people.
“I spent a lot of time in the operations myself, whether that was covering strike cover and actually helping out myself, or whether it’s taking politicians in. I think I’ve been into about 10 delivery offices in the past couple of months, but our people are key to what we do, and that really does speak to the need to re-establish that sense of pride in the company after the difficult period that we had previously.
“What that broader campaign to restore pride did was it meant we delivered our best Christmas operational performance for four years. We met our customer commitment to deliver items posted by the last recommended posting dates in time for Christmas. And that momentum has carried over into 2024.
“It really has been a year of progress. Delivering high-quality service continues to be our top priority. And I’m pleased to say that it continues to improve. For first class. It was up 4.5% year-on-year in the first quarter of this financial year, that’s April to June 24, and this is no easy task.
“We’ve continued to increase recruitment of permanent employees. We focused on employee health and wellbeing with a massive programme to support our people. So now everybody across the company has access to a free GP appointment, physio, mental health support, and that’s really about helping our workforce and promoting wellbeing.
“We put in place a quality control centre to support areas where there are challenges, so that we can identify those problem areas quickly and address stress challenges. We’re doing everything within our power, and it’s paying off, but we still got some way to go.
“We continue to modernise our business and to adapt to the decline of letter volumes and the growing demands for parcels, which are also getting larger and heavier, and next-day deliveries, of course. “And, while we’re investing in parcels, I think you saw in that video footage of our two parcel superhubs that we’ve just built, one in Warrington, one in Coventry. We’ve invested in parcel sorting machines in all of our mail centres. You may have seen that we’ve recently launched parcel lockers, but we are also investing in letters.
“To give just one example – we launched a counterfeit stamp scanner in our app recently, and I understand that it’s been downloaded on to 12million phones. This is all designed to set us up for the future and ensure that we can compete, but our success is not entirely within our gift.
“Our ability to invest in raising quality of service and to continue to offer the products and services that our customers demand is hampered by the inflexibility of a regulation that we, and only we, are governed by.
“So, for a sustainable future for Royal Mail and for the sector more broadly, as we have been saying for several years now, the universal service is unsustainable in its current form, the regulatory framework is broken. It was designed for a pre-internet age and is no longer fit for purpose.
“And it’s not just Royal Mail saying this. Ofcom, the independent regulator, agrees, and the facts speak for themselves. Letter volumes have fallen 20bn at their peak in 2004-05 to 6.7bn a year today. They declined by 9% last financial year, and letter volumes, are expected to drop to 4bn in the next five years.
“At the same time, we’re delivering to four million more addresses with all the new homes being built. So posties are delivering fewer letters to more addresses, and the cost of delivering each letter is ever increasing. Yet, during that time, there have been no changes to the minimum requirements for the universal service. The previous government sat on their hands and, as a result, Ofcom was slow to act.
“I know that everyone in this room wants to save the universal service but, to do that, we have to face facts. It needs to change, and the longer it takes to do that, the greater the risk that reform is too little, too late, or we need further reform going further than what we asked for today.
“Yes, parcel volumes are increasing, but the increase in parcels isn’t enough to offset the decline in letters, and people want more and more from parcel services. So, for example, we want to offer a tracked parcel product to everybody as part of the universal service.
“We believe the universal service is more than just a minimum service, that maintaining a service which has fixed costs and falling revenues makes it more difficult to provide a reliable service at reasonable cost. This is all causing significant pressure on Royal Mail, which lost £419m in 22-23 and £348m last year.
“And yes, we’re delivering our modernisation agenda. And we did return to growth in the second half of 23-24 but there is still a lot of hard work in front of us to get back to profitability. And of course, there are other things that we can do that are within our gift.
“I know we’ve heard this from GCA president Darren Cave, but one of the few options available to us as a business is to increase our prices – I know it’s difficult for you to hear but, as I said, I’ve heard that this is a concern for you.
“We have thought to keep price increases as low as possible in the face of increasing cost pressures, declining letter volumes and the lack of reform. But, even after the recently announced increase on the price of the first-class stamp, it remains below the European average, and we have frozen the cost of the second-class stamp, which is by far the most commonly-used stamp in the UK.
“Even Ofcom acknowledges that, without reform, people could be paying higher prices than necessary. That’s one of the reasons why Ofcom now recognises the need for change themselves.
“We’ve been on a journey with the request for universal service change. We originally were looking at a five-day delivery model, taking Saturdays out for first and second class. But that doesn’t go far enough anymore.
“As I said, government sat on their hands, and we put forward an alternative proposal in April, and we were pleased to see that Ofcom announced they were going to consult on that proposal a few weeks ago, with the consultation, I understand, is due to launch in the new year.
“But let me talk you briefly through our proposal, and just remind you that it has been shaped by speaking to thousands of customers, including consumers and small businesses across this country, and we appreciate the input from many of you here.
“I was at the Ofcom workshop in London in March, and I heard from many of you firsthand how important postal services are to you and your customers. And, of course, our proposal has also been developed in tandem with our two unions, CWU and Unite, and our people.
“So, what does our proposal look like?
“First, I want to assure you of one thing, we are proud to deliver the universal service where one price goes anywhere to every address across the country. It’s a real privilege, and that’s not something we’re looking to move away from.
“Darren, you used the word ‘dismantling’. This isn’t about dismantling the service. It’s about protecting it. We’re therefore proposing no change to first-class letters. They will still be delivered six days a week, and we’ll maintain that option of first and second class. Actually, a lot of our consumer research really showed that having a choice between speed and price was really key for customers.
“However, the proposal does include some changes. Second class will move to be delivered every other weekday, but would continue to be delivered within three working days as today. So actually, for the both the sender and the recipient, we believe that will be absolutely no change, people won’t see the change.
“While we’re changing how our operations work and how we deliver, it will continue to be delivered within three days, which is our commitment with the second class today.
“What’s key is that the delivery of bulk mail or access mail would be aligned to second class, so that it will arrive within three working days, rather than two working days. I think 70 to 80% of the letter volumes, or letter and card volumes that come through our network are that bulk mail. So that’s really where the cost saving lies.
“Listening to what our customers have told us, we want to introduce new features. I mentioned tracking on universal service parcels, but also new additional reliability targets, which we’re calling the tail of the mail targets. At the moment, we have a target for first class D plus one, but we want to measure it D plus two as well, so that you’ve got if you don’t hit it within the D plus one, which is next-day delivery, you will hit it within two days.
“To summarise, we believe this will have little impact on senders and recipients of cards and letters, and we believe it will allow us to protect the choice, price, speed and reliability for everyone.
“As Ofcom recognised in its call for inputs, it’s also necessary to ensure that the universal service remains financially sustainable. If we don’t get change now, the alternatives will look more extreme in the future.
“As I said, we originally asked for five days, we’ve now moved the proposal on to one which we think is better able to meet our customer demands, but also allows us to take more cost out.
“Look at Denmark, and I’m not saying this is where we want to go but, in Denmark, you only get a letter delivered one day a week. That’s not where we want to go, but that’s the most extreme situation. “I appreciate that this is difficult for some of you to hear, but no change is not an option, but at least from my perspective that doesn’t mean we can’t have a constructive dialogue, and we can’t work together to secure Royal Mail’s future, and I hope to continue those conversations with Amanda and David.
“Let me turn to Christmas 2024 which is fast approaching, and I’m sure it’s foremost in many of your minds. Christmas is our busiest time of year, with around double the normal volumes of letters and parcels and I particularly like the research that we did last year, which showed nine out of 10 people surveyed said they send Christmas cards, and more than three quarters, 77%, would rather receive a physical card to a digital one. I think that tells you how important it is that we get change right, and we get Christmas right.
“So, we’re really pulling out all the stops – what’s important for you to realise here is that, for us, Christmas is actually about the operation and being able to deliver. So we’re recruiting an army of temporary workers. You may have seen that we’ve already launched our friends and family schemes. If you’ve got any friends or family who worked for the Mail or want to come and help out over Christmas then sign up.
“We’re hiring additional vehicles, and we’re opening extra sorting capacity. And as always, we’ll be reminding customers to post early before the last posting days. That helps us. I appreciate you’ve got your Festive Friday on 29 November, but that really helps us, because it front-ends a lot of the volume, rather than meaning the operations are really under pressure as we approach Christmas.
“We’ll be looking to work with you here, and I know that David Gold and Amanda already have plans to bring the teams together to have a look through for what we can do for Christmas.
“We’ve got a lot in store, but I think it’s a bit early for me to say what we’re going to be doing beyond that kind of operational readiness, which has been planned for months. And what I will say at this point is that for everyone in the company, and that video I showed, talks to the fact that every single one of our people has a role to play in all of this.
“We are determined that we are going to deliver a great Christmas this year, and we will put in every effort delivering every item that is posted before the recommended last posting dates in time for the big day.
“I’ll just say once again, we want to continue to work with you in partnership around those other big sending card moments. I think Amanda had some really powerful statistics on the screen earlier around births and deaths and birthdays and weddings. It’s not just a partnership for Christmas, it’s a partnership throughout the year. I hope we’ve turned a corner, and I hope that we have a successful Christmas 2024 looking ahead to 2025 and I’ll finish there.
“And I think Amanda’s going to open the floor for questions. Thank you.”
Amanda Fergusson, GCA CEO: “Fiona, thank you very much for stepping in at the last minute. And yes, we will certainly be continuing our discussions, and we’ll look forward to the next meeting.
“We’ve had loads of questions in so thank you, all of you who sent them in. I’ve got a list here, and Fiona has also kindly said she’ll take any others from the floor. We’ll do as many as we can. And Fiona and David, we’ve got a follow-up meeting with David Faulkner and David Byk and myself to follow on any we don’t get to do today.
“If I can start by asking those of you who’ve got questions to put your hands up and I’ll start with David Byk.”
David Byk, CEO of Ling Design & GBCC: “We’re an industry that relies on affordable, reliable national services each day, what should we be doing to give us as an industry, the best chance of thriving under this postal service you have set out?”
Fiona Hamilton, Royal Mail: “From our perspective, it’s a lot we need to do ourselves around transformation, modernisation, but really key for us is that universal service could change, and I would like to see us work together on that so that we all understand and recognise the need for change, and we get it right for our customers. So that really is my number one priority here, in terms of how we work together.”
Mark Callaby, MD of Ohh Deer: “If you do need to change universal service, is it likely that we’re going to go down to something like in Denmark, which is one day a week, maybe it’s going to be every other day. Is that on the plan still, and is that likely to happen?”
Fiona Hamilton, Royal Mail: “I used Denmark as an extreme case, not somewhere where we want to be, and not somewhere where you want to be. It’s difficult to predict the future, but I think what I will say is that we believe our proposed model puts us on a strong footing for the future.
“I didn’t talk about how we would operationalise it, but one of the plans is that we move on the days where second class isn’t being delivered on your street, we would move first class on to the van network, and the van network is then delivering parcels and first-class letters.
“I appreciate that you won’t understand that, but that actually allows us to take out the cost associated with the postman or woman going up the street every day while continuing to deliver that service. So protecting the revenue as much as taking the cost out, because it’s a balance between revenue and cost. From our perspective, really, our proposal is about protecting, as I said, not dismantling, but protecting it longer term.”
Jakki Brown, co-owner of Progressive Greetings magazine: “Thanks very much for saying that you’re going to be doing marketing at Christmas. I thought the video shown is great, spot on, which is such a shame that last year it wasn’t shared with everybody, because it resonates. Anything you can do for this year’s Christmas activity would be great, grateful if you could share it so we can share with our communities.
“On specific products. I seem to recall in the past, you did some great stamps, which were occasion-based books. Are there any plans to introduce products that would actually help our industry promote what we do? Whether it’s stamp books that are occasion based, happy birthday, sorry, congratulations, or the thing that I know we’ve touched on before, the bundled stamps which would allow reduced prices for Christmas card sending? Discounted stamps like they do in Australia, a cheaper stamp for Christmas cards.”
Fiona Hamilton, Royal Mail: “The special stamps we continue to do, I think the last ones we did were for Porridge, and my particular favourite was the Spice Girls earlier this year. I appreciate you’re talking about greeting cards specifically and the other thing that we could talk about is doing a postmark. I think that’s something maybe we can pick up with David.
“We’ll also do the usual Christmas stamps, and that’s all about promoting the value of stamps and the joy that stamps bring to people, as much as the greeting card itself.
“On discounted stamps I’d rather be straight with you, it’s not something that we’re going to do. Putting aside how we would actually administer it, for us, what’s really key is that we maintain that one-price-goes-anywhere to every address across the country, and that price is the same for everybody, every day of the year, whether they go into the corner shop or the post office or the supermarket. I’m afraid that’s not something we’ll be looking at, but I’d rather be open with you about that.”
Seth Woodmansterne, MD of Woodmansterne Publications: “Thank you for coming and sharing more of the story that Royal Mail is working on, on the journey that you’re working on to progress.
“Listening to what you’ve shared, and trying to think about the shared concerns of the Royal Mail and the GCA, I think there are three shared concerns, falling volumes, rising prices and reliability.
“I just wonder whether you can share more on Royal Mail’s business plan for 2025 because you must have one, especially with negotiations with Ofcom and a potential new buyer, a new owner.
“:Your requirement currently, and I know you’re working on a plan with Ofcom to evolve this, but your current requirements are 93% delivery of a first-class letter within one working day, and 98.5% for second class within three days. But your current measures of performance looking at Ofcom’s website, is 74.5% for first class within one day, and 92.4% for second class within three days.
“Can you share more about Royal Mail’s plan to improve those percentages while you are increasing prices? And I do understand that you’ve got this other force of nature of more houses to deliver but how can we increase the reliability against the rising prices?”
Fiona Hamilton, Royal Mail: “You quoted the figures there, I think, for the financial year 2023-2024 so the end of last year, and we have seen improvements since then. So Q1 of this year, first class is up 4.5% and second class is up 1.7% if I can do the maths. So it’s improving.
“I appreciate it’s not where it needs to be. I appreciate we’re not hitting those targets – we have asked Ofcom to revise the targets so they’re more realistic for us to achieve. We’ve got to be honest about the fact that we’ve still got some way to go to achieve them.
“I think the question is what we’ve got in store for the future, but it’s what we’re doing to bring that up already. Key is hiring more people. We’ve got problems with recruitment and retention, particularly in some areas. And that’s starting to come through when we’re starting to see those improvements. Another key issue for us is being able to identify the offices where there are problems and tackling it straight on. We are really doing what we can to work out where the problems are, and to invest resources to get it up to where it needs to be.
“But of course, investing additional resource, whether that’s hiring vans, hiring people, comes at a cost and, in a financially loss-making business with the cost continually growing and going up, that’s where you see the need to cover both costs and where you see, for example, the price of the first-class stamp going up.
“I appreciate that’s difficult. I get it. I do. You’re not the only ones that will talk to the challenge and tension between affordability and reliability, but we’re doing what we can to bring it back up again, and we’re starting to see the fruits of our labour, because, as I said, first class, for example, is up 4.5% in in this year.”
Michael Apter, owner of Paper Tiger, Edinburgh: “Thank you for sharing your knowledge and information today. The actual Post Office is highlighting that the proposed service cuts to the USO are going to profoundly negatively impact on two thirds of their business, and some post offices will go out of business as a consequence.
“The cuts to the USO, if they’re implemented, are going to have a significant impact on my retail greeting card business, but also going to affect everyone in this room.
“I went to the Ofcom consultations back in March in Edinburgh, and was astounded at the range of other businesses and organisations and consumer organisations that are also going to be impacted by any changes to the USO.
“We all rely upon the Royal Mail to deliver. It’s the absolute fundamental job of the Royal Mail. So how does the Royal Mail propose to deliver a positive impression of a more expensive but much reduced service to all of our consumers? Stamp prices are increasing by 22%”
Fiona Hamilton, Royal Mail: “Good to hear that you were there in March. And I agree with you. It was a lot of different stakeholders in the room, whether that was small businesses, whether that was publishers, whether that was greeting cards, whether that was post offices, as you mentioned. There were a lot of people.
“What I will say is that the event in March was before the Ofcom consultation closed and before we put forward our proposal for change.
“I hear your concerns, I get that reliability and affordability are key here. I’m hearing it time and time again. The gentleman prior to you asked much the same question in terms of that tension, we are doing what we can to bring up that reliability. People across the whole country rely on us, so we’re doing what we can to improve that.
“But, at the same time, as a loss-making business, we need to cover our costs and, while our hands are tied behind our back by Ofcom and the regulations in place, we can’t take cost out elsewhere, so stamp price increases are one of a few options available to us. We’re kind of stuck between a rock and a hard place. I get that those two things are a concern, but customers also need to understand the need for universal service change and why we’re requesting it to protect it for the future.
“We look at all of our prices across the board to see what flexibility you’ve got where and, of course, you touch on the first-class price increase, but you’ve also got the second-class price that has been fixed. we’ve got a price cap on the second-class stamp, which is regulated by Ofcom.
“We do consider our customers. It’s a difficult time for everybody as well. The economic climate isn’t great. I understand that we have to consider not only the balance between the different kind of levers we’ve got available to us in terms of pricing, which product we price, how we do, but also the impact that has on the customer that’s actually sending. And we’ll look at a rate all of our products when it comes to how we play around with that mix.”
Amanda Fergusson, GCA CEO: “Pricing is key for us. Seeing that huge increase on first class when you know other products weren’t going up by the same was really difficult. Pip, do you want to just pick up on that?”
Pip Heywood, MD of Thortful: “Thanks for joining us today. Fiona, so many of us have spent a lot of time poring through the research from Ofcom, the research from the Royal Mail. Something really struck me in Ofcom’s 2023 residential postal affordability research, that there was evidence that pushing first class pricing over £1 broke a psychological threshold for customers. That tells me there is elasticity in pricing, and it’s a sensitive threshold.
“How have the Royal Mail modelled and tested the 30p first-class price increase to ensure you aren’t victims of your own demise and sucking volume out of our industry?”
Fiona Hamilton, Royal Mail: “I looked at the research last night as well. And talking about psychological threshold is different, talking about the value of something is different to talking about affordability. Ofcom assesses the affordability of our pricing.
“if I look at the Ofcom report on the second-class price cap, they were clear that they believe that second class, in its current form, is affordable for the majority of customers and, for those customers where it’s not affordable it’s because they’ve got broader challenges. It’s not the cost of the stamp that’s making it unaffordable. They also said in that review, that our other prices are deemed affordable. I can quote it if you want,
“But we do consider all of our customers. We do get that it’s a difficult time for everybody, and we do think long and hard about how we do these things, but in the absence of universal service reform, it is one of the few options available to us to manage as a business.”
Amanda Fergusson, GCA: “I think I’m going to have to call it a day. I’m really sorry, because I’m just mindful of time. We will put the other questions to Fiona. We’ve got a follow-up meeting with Fiona and David Gold, with David Byk, and David Faulkner, and then we will follow up and feedback.
“I’m really sorry we’ve run out of time. Fiona, thank you again for stepping in at the last minute, and I know you’ve got a train to catch soon, but thank you very much for joining us.”
