Small businesses will suffer if Royal Mail proposals go ahead warns MP

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By a Newsnet reporter

Small businesses face “serious consequences” if a proposal to allow significant price increases on postage goes ahead an MP has warned.
 
SNP MP Mike Weir has claimed that a proposal that would give Royal Mail the power to charge an unlimited price for first class stamps while the cost of second-class postage could rise by more than 50 per cent, would have a “perverse” impact on small businesses.

The SNP’s Business and Enterprise spokesperson spoke out just days before an Ofcom consultation closes on the future of the Universal Service Obligation (USO).  The obligation ensures that the Royal Mail will make deliveries to every UK address regardless of location other than in exceptional circumstances.

The USO requires Royal Mail to collect and deliver letters six days a week (and packets five days a week) at an affordable and geographically uniform price to every address in the UK.  It also sets performance standards on Royal Mail: 93% of First Class mail must arrive the next day and 98.5% of Second Class mail must arrive within three days of posting.

According to Ofcom, without regulatory changes there is a risk that Royal Mail may not be able to continue to deliver the USO to the same standard.  Proposals by Ofcom suggest there should be no cap on prices for the vast majority of Royal Mail’s services, including business post, bulk mail, and large letters and parcels sent second class.

The SNP MP claimed that to remove the cap would harm small businesses that rely heavily on the Royal Mail’s services.  Mr Weir said that the proposals are coming at a time when many firms are under considerable financial pressure.

He said:

“The Ofcom proposal would allow Royal Mail to charge whatever it wanted for first class services while the cost of second-class postage could rise by more than 50 per cent.

“An increase in postage prices could result in a downward spiral, with less people sending letters, and in turn leading to even higher prices.

“Large businesses who send a lot of mail will never pay the full first class price but will always be able to get a better deal or bulk discount from Royal Mail.  They would also have the option of doing a deal with one of the alternative private providers.

“These options are not available to our small businesses.  They rely on Royal Mail’s service to be able to deliver letters and small packages around the country.  They could be priced out of the market risking their very survival.

“While this is only at the consultation stage, it is worrying that that Ofcom seem prepared to let small businesses pay the price of ensuring that large companies get a better deal.”

“Such an outcome would be completely perverse and cannot be allowed to stand.  If we are to get ourselves out of this current economic mess the driver will be from small business and Ofcom must take this into account in determining the proposals.”

Ofcom proposes to give Royal Mail freedom to set its own prices for the majority of its products including:

  •     First Class deliveries – letters, large letters (A4 in size and up to 750g in weight) and parcels;
  •     Second Class deliveries – for large letters and parcels up to 1Kg in weight;
  •     standard parcels;
  •     business mail – metered or franked mail and pre-printed envelopes; and
  •     bulk mail – mainly large businesses sending a large volume of post in a single mailing for example, bank statements.

Ofcom’s Group Director of Competition Stuart McIntosh has defended the proposals saying: “The universal postal service – which ensures that letters are delivered to every address in the UK six days a week – is significant and highly-valued by the public.  However, unless changes are made to the regulation of post, this service is under threat.

“Ofcom’s proposals are designed to safeguard the UK’s postal service, ensuring it is sustainable, affordable and high-quality, to the end of the decade and beyond.”

The public consultation will close on 5 January 2012.  Ofcom expects to publish a decision on these proposals in spring 2012.

All those interested in making representations can do so here: https://stakeholders.ofcom.org.uk/consultations/securing-the-postal-service/howtorespond/form