Strain on Royal Mail could see Scotland worst hit

CONCERNS have been raised that postal services in Scotland could be hit badly as the Royal Mail warned it could struggle to fulfil its universal service obligation, which guarantees the same delivery levels across the UK.

The warning from Royal Mail came after a slump in profits was announced. Picture: TSPL

The comments from Royal Mail came after a slump in its profits were announced along with a fall in the share price of 30 per cent since February.

Opposition politicians claimed the threat to the universal service obligation (USO) was a direct result of the Coalition privatising Royal Mail.

The USO means post is delivered to all parts of the UK at the same cost, six days a week.

However, Royal Mail claimed the “harsh realities” are that competitors such as Amazon are “cherry picking” profitable urban areas, meaning that rural and hard-to-reach areas were becoming “uneconomical”.

If the obligation is scaled down it would hit Scotland hardest because of difficult-to-reach areas, including Argyll and the Highland and Islands.

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Labour’s shadow business minister Ian Murray said: “The Tory-led government botched the privatisation and cost the taxpayer £750 million. It would now appear that all their promises on the viability of the six-day-a-week, one-price-goes-any-where USO are in tatters. We warned time and again privatisation of the Royal Mail would threaten the universal service.

“The Government should intervene immediately and demand that the postal regulator looks into the issues of unfair competition as a matter of urgency to ensure this cherished service is not lost forever.”

SNP postal services spokesman Mike Weir, the MP for Angus, also called for intervention. He said: “The sad thing about this is it was utterly predictable. It has been nothing but a shambles since day one – and the people who will pay for this incompetence are the individuals and businesses in rural parts of Scotland who need, and should have, the same postal services as the rest of us.”

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He added: “A privatised postal service in a competitive market will undoubtedly put pressure on government to reduce the terms of the USO, as its competitors cherry pick the profitable urban routes, leading to a reduced service in rural and less affluent areas.”

Royal Mail said it is targeting higher growth areas, such as clothing and footwear, in an effort to attract more business from larger retailers.

Addressed letter volumes fell by 3 per cent – but this was better than expected, due to improvement in economic conditions.

Letter revenues increased by 1 per cent to £2.24 billion as a result of price increases and an uplift from elections mail.

Royal Mail believes the impact of Amazon starting its own delivery network will reduce annual growth in the parcels market from a medium-term target of 4 per cent to

1 per cent for the next two years.

The firm said: “Additional capacity in the market has contributed to increasing price pressure as other players seek to fill their networks.”

Regarding the USO, the postal service regulator insisted it had to stay. An Ofcom spokesman said: “Protecting the universal service is at the heart of Ofcom’s work, and our own evidence clearly shows that the service is not currently under threat. We are listening to the views of Royal Mail and other parties regarding competition in the market. We would assess any emerging threat to the service quickly, in the interests of postal users.”

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