News

No reforms to Royal Mail, says Ofcom

10 March 2017

Royal Mail will not be forced to make sweeping changes to the way it operates after a review by Ofcom found current safeguards are "working well".

The communications regulator said its 2012 framework, put in place to secure the universal postal service, will be retained until 2022.

Ofcom said safeguards already in place, such as a cap on second class stamp prices to protect vulnerable consumers, are generally "working well for people and businesses who use the post".

Last month Royal Mail announced the price of stamps is to increase by 1p on March 27.

Royal Mail said the price changes are needed "to help ensure the sustainability of the universal postal service".

But the watchdog said it decided not to impose new controls on Royal Mail's wholesale or retail prices because the company already has "strong commercial incentives" to improve its efficiency.

Jonathan Oxley, Ofcom's competition director, said: "We know people value the universal postal service and we will continue to ensure that it remains effective.

"Our review has shown that current rules are generally working well for companies and households.

"Royal Mail still has room to improve - so we'll keep a very close eye on all aspects of the company's performance, and step in if we need to protect consumers from high prices."

The review also found Royal Mail's profit margin for 2015/16 was within, but at the lower end of, the 5-10% range, which Ofcom considers likely to be consistent with a sustainable universal service.

Ofcom also said there is scope for Royal Mail to go beyond cost-cutting plans already in place and warned, while the company's delivery performance has improved since 2012, some targets are still being missed and could result in significant fines.