Royal Mail to 'fight' for every letter

The UK's postal service market will be opened up tomorrow, allowing rival companies to collect, sort and deliver stamped mail for the first time since the reign of Charles II.

The postal revolution will see "independent" post boxes for letters appearing on street corners for the first time, as rivals are given the legal right to deliver first- and second-class letters.

Royal Mail faces competition from more than a dozen companies that have already registered with regulator Postcomm to handle post in the UK, including German firm Deutsche Post and Dutch postal service TNT.

Initially, they are expected to concentrate on the lucrative business sector, which accounts for 80 per cent of the market and helped boost Royal Mail profits by 20 per cent to 159 million in the first half of 2005.

Royal Mail currently loses 5p for every first-class letter delivered and 8p for every second-class one.

Despite that and years of under-investment, which mean only 50 per cent of its letters are sorted mechanically, compared with 90 per cent among competitors, it claims it is ready to take on its new rivals.

"Royal Mail will fight hard for every single letter," said spokesman David Simpson. "Royal Mail is determined to compete successfully in the open market, but in order to do so we need a fair regulatory regime and the ability to invest 2 billion in the modernisation of the business.

"Royal Mail is already delivering record quality of service to its customers and we're determined to do even better."

Industry watchdog Postwatch believed large businesses would be the first to benefit from the reforms, while what it called "social customers" would see "little practical difference" in the services they use.

"Competition will maintain the pressure on Royal Mail to deliver quality of service to customers, improve efficiency and drive innovation," it added.

"Competition will also reinforce, not undermine, the provision of a universal postal service. The main threat to this service is an inefficient Royal Mail."

But the Communication Workers' Union (CWU) warned that the universal service was "officially under threat". General secretary Billy Hayes said: "Postcomm is threatening the universal service. It should not under-estimate the public affection for daily mail delivery to home addresses."

Despite competition from European rivals in the UK, Royal Mail will not be allowed to compete in their countries because the markets on the continent have not yet been liberalised.

New Zealand and Sweden are the only other two countries to liberalise their postal markets, five and 12 years ago respectively. Their original services still supply at least 90 per cent of mail.

At present in the UK, rival companies can compete in the bulk mail market of more than 4,000 items - around 30 per cent of the market by value - although Royal Mail still has a market share of 97 per cent.

Runners and riders

FOURTEEN companies have been given a licence to operate in the newly opened-up postal service. Here are some of the major players:

TNT Mail UK: Operating since 2003, Berkshire's TNT has won large deals with Sky and Lloyds TSB.

DHL: The non-German arm of Deutsche Post, it will now be able to deliver bulk mail and offer more document-exchange services.

UK Mail: A subsidiary of Business Post, it handles 250 million letters a year.

DX Network Services: It specialises in document exchange - a private network that delivers time-critical mail to around 27,000 businesses.