BRIEFING PAPER Number 06763, 1 December 2020 By Niamh Foley Lorraine Conway Postal Services Antony Seely Lorna Booth Contents: 1. Overview of UK postal services 2. Common problems 3. Regulation of postal services 4. The letters market 5. Stamp prices 6. The parcels market 7. Performance of Royal Mail Annex: Postal Services Act 2011 www.parliament.uk/commons-library | intranet.parliament.uk/commons-library | [email protected] | @commonslibrary 2 Postal Services Contents Summary 4 1. Overview of UK postal services 5 1.1 Main operators 5 Royal Mail Group 5 Post Office 6 Other postal operators 6 1.2 Regulators 6 UK Government (Department of Business, Energy and Industrial Strategy) 6 Ofcom 7 Citizens Advice 7 POSTRS 8 1.3 Unions 8 2. Common problems 9 2.1 Receiving post 9 ‘Something for you’ cards 9 Receiving someone else’s post 9 Redirecting your post to your new address 9 Receiving nuisance or junk mail 10 Receiving damaged or unwanted goods 10 2.2 Sending post 11 Changes to collection times at post boxes 11 Lost mail 11 Prohibited items in the post network 11 Royal Mail’s Parcel Collect service 12 2.3 Postcodes 12 Finding out what your postcode is 12 Changing your postcode or address 12 2.4 Making a complaining about postal services 13 Complaining about Royal Mail 13 Complaining about a company other than Royal Mail 14 2.5 Parcel and letter deliveries during the coronavirus (Covid19) pandemic 14 3. Regulation of postal services 15 3.1 The universal postal service 15 Regulatory conditions placed upon Royal Mail 16 3.2 Regulatory conditions placed on other postal operators 16 4. The letters market 18 4.1 Trends in the letters market 18 Trends in type of operators 20 4.2 End-to-end market competition (U2D) 20 5. Stamp prices 22 Historic stamp prices 23 6. The parcels market 24 6.1 Impact of the Covid-19 pandemic 24 6.2 Competition in the parcels market 25 6.3 Consumer problems in the UK parcels market 26 3 Commons Library Briefing, 23 April 2021 Parcel Surcharges 28 6.4 Deliveries for disabled people 34 6.5 Leaving the EU 35 6.6 Postal regulation 37 6.7 Further information 37 7. Performance of Royal Mail 39 7.1 Five-year summary of Royal Mail financial performance 39 7.2 Modernisation of Royal Mail 40 7.3 Royal Mail targets 41 7.4 Complaints to Royal Mail 42 Annex: Postal Services Act 2011 44 Background to the Act 44 Provisions in the Act 45 The privatisation of Royal Mail 45 4 Postal Services Summary This note gives an overview of postal services in the UK. It discusses current regulation, market trends and consumer problems. Section 1 describes the key bodies in the UK postal market and the relationships between them. This section also introduces key terminology used to describe the UK postal market. Royal Mail is the largest operator and the 'universal service provider' in the UK postal industry. Ofcom is the regulator of UK postal services and focuses much of its regulatory activity on Royal Mail as the universal service provider. Section 2 tackles frequently asked questions regarding postal services, with a particular focus on issues that constituents may face. Section 3 lays out the regulatory framework of UK postal services. Section 4 sets out trends in the UK letters market. UK letter volumes have been in decline since the mid-2000s. Section 5 describes recent trends in stamp prices. Ofcom granted Royal Mail price flexibility over stamp prices in 2012. Soon after, the price of 1st class stamp rose substantially. A 1st class stamp is now priced at 76p, 95% higher than the face value of a stamp in 2010. Section 6 sets out trends in the UK parcels market. Since March 2020, parcel deliveries have significantly increased due to an increase in online shopping prompted by the Covid-19 pandemic. Royal Mail reported a year-on-year increase of 34% in parcel volumes in the five months to 30 August 2020. Section 7 explains the recent performance of Royal Mail. Royal Mail’s profits after tax fell slightly over the last couple of years and were £196 million in 2019/20. Royal Mail missed some of its Quality of Service targets in each of the past few years, some by quite a margin. It commented that its performance had been “significantly impacted by a number of exceptional events”. Ofcom investigated this and issued Royal Mail with a decision in July 2020. In 2018/19 and 2019/20, Royal Mail improved on meeting these targets. Post Office The Post Office is separate from Royal Mail. The Library publishes information regarding the Post Office in separate briefings: • The Post Office • Post Office Numbers Contributing Authors: Lorraine Conway, Consumer Affairs, Section 2.1 Antony Seely, VAT leaving the EU, Section 6.5 Cover page image copyright: Trevor King: Glossop mail vans, licence. 5 Commons Library Briefing, 23 April 2021 1. Overview of UK postal services 1.1 Main operators Postal services was formerly a part-nationalised industry in which the (formerly) state owned Royal Mail had a monopoly over letter delivery with some competition in parcel delivery. The liberalisation of postal services in the UK began in the early 2000s with markets being opened up to competition. Royal Mail was subsequently privatised following the passing of the Postal Services Act 2011. The Post Office, now a separate business, remains entirely owned by the Government. Postal services are generally reserved, rather than being devolved to Scotland, Wales and Northern Ireland. The figure below maps postal services in the UK – the elements are explained under the headings below. UK Postal Services Mail delivery Post offices Ofcom Regulator Citizens Advice Consumer watchdog UK Government Royal Mail Group Other ‘end-to-end’ Department of Business, Energy Universal Service operators Provider and Industrial Strategy In addition to end-to end deliveries Royal Mail provide Entirely owns final mile delivery to access operators Post Office PLC Access operators Unions Royal Mail Group Royal Mail Group is the UK’s largest postal operator, the only postal operator currently providing UK wide end-to-end letter delivery services, and the UK’s universal service provider. Section 7 of this note discusses in detail the recent performance and modernisation of Royal Mail. 6 Postal Services Types of letter delivery There are two types of letter delivery services end-to-end services and access services. • End-to-end service is where the same postal operator undertakes the entire process of collecting, sorting and delivering mail. • Access service is where an operator collects and sorts the letters but then hands over final delivery to Royal Mail. Royal Mail is obliged to open its network to access operators. More information on the volume of letters delivered by these types of service can be found in Section 4 of this note. Post Office The Post Office is a limited company entirely owned by the UK Government – it is separate from Royal Mail. The Post Office network is made up of roughly 11,500 branches. The Library publishes information on the Post Office in separate briefing notes: • The Post Office • Post Office Numbers Other postal operators Much of Royal Mail competition is in the parcels market rather than in Details of the the letters market. The parcel’s market is highly competitive and volumes of letter growing whereas Royal Mail operates a near monopoly over final mile and parcel deliveries letter deliveries in the UK. can be found in Sections 4 and 6 of There are a number of well-known brands which operate in competition this note. to Royal Mail, for example Hermes, Yodel, and DPD. 1.2 Regulators UK Government (Department of Business, Energy and Industrial Strategy) The Department of Business, Energy and Industrial Strategy (BEIS) has Government responsibility for postal affairs. The current Minister with this portfolio is Paul Scully MP, Parliamentary Under Secretary of State, Minister for Small Business, Consumers and Labour Markets. The Government, with Parliament, is responsible for legislation on postal services but currently have no published plans for new legislation in this area.1 Royal Mail is a fully privatised company. It is for Ofcom, as the industry regulator, to monitor the performance of Royal Mail in line with current legislation. BEIS has responsibility for the Post Office which remains entirely in Government ownership (see below). 1 The Postal and Parcel Services (Amendment etc.) (EU Exit) Regulations 2018 makes a number of changes to legislation around postal services in response to Brexit. See Section 7.2 for further details 7 Commons Library Briefing, 23 April 2021 Ofcom The Postal Services Act 2011 transferred regulatory powers over postal services from Postcomm to Ofcom. Under the Act, Ofcom must carry out its regulatory activity in a way that secures the universal postal service. Ofcom also has a duty under the Communications Act 2003 to further the interests of citizens and of consumers, where appropriate, by promoting competition. Where there is a conflict between the two duties, the provision of the universal postal service takes precedence. The universal postal service The universal postal service is essentially the ‘one price goes anywhere’ principle of affordable postal services to all UK addresses. It requires Royal Mail (the universal service provider) to deliver to every address in the UK, six days a week, at a standard price.2 The legal basis for the universal service is the Postal Services Act 2011 and the Universal Postal Services Order. The universal postal service is described in more detail in Section 3.1 of this note.