Taxpayers could face a multi-million pound bill to help Royal Mail deliver the mail.
The 500-year-old postal service, which this month became a takeover target, has urged the government to contribute to the costs of delivering the letters.
He has long argued for a change to the rules stipulating that he must deliver letters across the UK at the same price six days a week.
Struggle: Insiders say universal service obligation left parent company International Distributions Services vulnerable to takeover
Insiders say the Universal Service Obligation (USO), which costs Royal Mail up to £675m a year, has left its parent company International Distributions Services vulnerable to a takeover, the board having rejected a £3.2 billion offer from Daniel ten days ago. Kretinsky.
Last week, IDS urged regulator Ofcom to speed up reform, as the Czech billionaire – co-owner of West Ham Utd and shareholder in Sainsbury’s – worked on a new bid.
Royal Mail says the system is obsolete because the volume of letters has fallen from 20 billion twenty years ago to 7 billion. They should fall to 4 billion within five years.
Royal Mail, privatized in 2013, hopes to cut second-class deliveries to cut costs. In the meantime, he asked ministers to contribute financially until the rules were reformed, although he did not reveal the amount of taxpayer funding he was seeking.
Ofcom estimates the cost of this obligation to be between £325 million and £675 million per year. Royal Mail reported a loss of £319m in the first half of its financial year, following losses of £419m in 2022/23.
“We are calling on the government to consider a temporary contribution,” Royal Mail said. “The case is made even more compelling if Ofcom delays urgent regulatory reform until after a general election, which, as Ofcom acknowledges, could lead to “consumers paying higher prices than necessary”.
Even then, he warned that the USO could become unsustainable again as the number of letters continues to decline. At this stage, the government may have to provide subsidies on a permanent basis, he says.
Royal Mail also wants Ofcom to assess the costs of the USO every two years, “enabling a fair debate on how these costs are properly covered”. This could make it easier for Royal Mail to cut services. In plans submitted to Ofcom this month, Royal Mail proposed delivering second-class letters every other working day.
First-class mail would still be delivered Monday through Saturday but would cost more, with packages still being dropped off seven days a week.
Royal Mail would also slow down the delivery of standard bulk business mail, such as invoices and statements, to arrive in three working days instead of two, saving up to £300m but costing up to to 1,000 jobs.
The Postal Service said the changes must be approved by April next year or customers will face “significant further price increases.”
The Department of Commerce said: “We have no plans to change the USO and any changes to the way Royal Mail operates must take into account the impact on vulnerable businesses and consumers. »
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