Missed delivery targets news comes at worst time for greetings industry
The news today, 13 December, of Ofcom’s £10.5million fine on Royal Mail for failing delivery targets for the second year running couldn’t have come at a worse time for the greeting card industry.
As people are in the middle of sending their Christmas cards and being reminded to use the second-class service that’s still affordable at 85p, the industry watchdog’s highlighting of Royal Mail’s continuing failure to meet its obligatory delivery levels is worrying.
Within minutes of the news breaking, the GCA had issued a press release via its PR agency Arena to all media sharing the industry’s concerns as well as including reassuring words about how the tradition of sending cards is strong.
“Today’s announcement confirms what our members have been telling us all year,” GCA CEO Amanda Fergusson said, “that Royal Mail continues to treat small businesses and consumers who simply expect delivery promises to be kept, with disdain.
“Of course, the improvements of early 2024 have been welcome, but every delayed or late delivery has the potential to weaken the faith we have in the precious postal service that we all rely on.”
This morning’s announcement said £10.5m fine – which goes straight to HM Treasury – was being imposed because only 74.7% of first-class mail was delivered within one working day of collection when the requirement is 93% and the second-class target was also missed, with 92.7% arriving within three working days against the 98.5% target.
Bizarrely, the targets exclude the Christmas period, from the first Monday in December through to the new year bank holiday, the time when most people are actually using the postal service, as Ofcom’s own research shows 42% of people now only use the mail to send greeting cards.
And Ofcom said there had not been substantial improvements over the 2023-2024 performance, where the levels were 73.7% and 90.7% respectively, adding: “The company breached its obligations by failing to provide an acceptable level of service without justification. Royal Mail took insufficient and ineffective steps to try and prevent this failure, which is likely to have impacted millions of customers who did not get the service they paid for.”
Despite Royal Mail again blaming its poor performance in the April 2023 to March 2024 financial year on its challenging financial position, and delays to the ballot on a deal that followed the previous year’s industrial action, that’s over £16m wasted on fines in just over a year – and Ofcom said it would have been a £15m penalty this time, but a 30% reduction was allowed to reflect the company’s admissions of liability and agreement to settle the case.
Ofcom’s director of enforcement Ian Strawhorne said: “We do not consider either of these to be justifiable reasons for Royal Mail’s failure to provide the levels of service expected of it. Ultimately, it is for the company to manage its financial position taking account of its obligations.”
It’s the second year running that Royal Mail has been found to be in breach of its regulatory obligations, with leeway being given for the previous three years due to the impact of the pandemic as Ofsted considers evidence of exceptional circumstances beyond the company’s control to decide whether it would have achieved its targets had those events not occurred.
As well as the fine, Ofcom has been pressing Royal Mail regularly on what it is doing to turn things around, but Ian said: “While there has been some progress, its overall performance in 2023/24 was only marginally better than its reported performance in 2022/23, and it needs to do much better.
“At a minimum we expect to see a clear, credible and publicly-communicated plan setting out how Royal Mail will get back on track through meaningful, sustainable and continuous improvements for customers.
Having failed to hit its targets in 2022/23, Royal Mail “did not set out a clear improvement plan” for 2023/24 but, following engagement with Ofcom, the company published an update on its improvement plans in May, and Ofcom intends “holding it to account for delivering a better service”.
Amanda added: “We welcome Ofcom’s demand for a clear, credible, and publicly-communicated plan setting out how Royal Mail will get back on track and look forward to understanding the timescale for that plan.
“Our own research this week shows how much the British public love to send cards – especially at Christmas – and how that tradition is being embraced by younger people as they discover the emotional benefits of sending a card for themselves and the recipient.”
In response to the fine, Royal Mail parent company International Distribution Services – which is currently waiting to hear from the government if the sale of RM for a total £5billion to Czech billionaire Daniel Křetínský will get the go-ahead – told the BBC it was essential that its efforts to improve services were backed by “urgent reform” of the universal service obligation, “restoring it to a level that meets the needs of today’s postal users, not the needs of customers 20 years ago”.
While letters volumes have declined dramatically, last month IDS said revenues had increased by 10% in the six months to the end of September, compared to the same period in 2023, and its operating loss was down to £26m from £234m the year prior.
Ofcom and RM have been looking at ways in which the USO could be reformed, possibly by cutting second-class deliveries to five or even three days a week, while keeping the first-class service to abide by the obligation to deliver six days a week for the same price to all UK addresses.
