Amazon accused of ‘hiving off’ Royal Mail profits amid letter crisis

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https://www.telegraph.co.uk/business/20 ... er-crisis/

Amazon has been accused of “hiving off” profits from Royal Mail amid a deepening crisis at the postal service.

MPs have raised concerns that the US tech giant is benefitting from Royal Mail’s nationwide delivery network without contributing to the huge costs of maintaining its infrastructure.

Amazon, which runs its own logistics business alongside its e-commerce website, often delivers its own parcels in densely populated areas such as city centres but outsources deliveries in unprofitable rural areas to Royal Mail.

Although Royal Mail charges a fee for these services, critics have claimed the contracts provide “nowhere near enough” to cover the huge losses incurred to maintain a universal delivery service across the UK.

Liam Byrne, the chairman of the Commons business and trade committee, said: “We recognise that the postal market has changed beyond recognition.

“Major logistics firms are effectively hiving off profits while relying on Royal Mail’s universal service network to reach harder-to-serve parts of the country.”

MPs also raised concerns that courier rivals such as Amazon, Yodel, Evri and DPD are undercutting Royal Mail by using gig-economy employment models.

Daniel Křetínský, the Czech billionaire who bought Royal Mail in a £3.6bn deal last year, recently complained about the “complete absence of a level playing field” on labour standards. Speaking earlier this year, he said his company’s labour costs were double those of its competitors.

MPs on the business and trade committee urged Ofcom to improve its regulation of Royal Mail and expand its oversight to include bulk mail such as energy bills and hospital letters, as well as post delivered by rival couriers.

They added that if the regulator failed to do so within six months, Peter Kyle, the Business Secretary, should consult on statutory changes to its powers.

The MPs suggested Mr Kyle should also present proposals to tackle the imbalance in the market, including a potential tax on rivals that use Royal Mail’s network and the introduction of minimum employment standards.

The broadside came in a new report into recent failings at Royal Mail, which has repeatedly fallen short of its delivery targets. The postal service is estimated to have delivered 219 million letters late this year.

The MPs branded Royal Mail’s performance as “unacceptable” and took aim at Ofcom for failing to address the problems. They raised concerns that the watchdog was “not up to the job” of regulating an increasingly complex and competitive postal market.

While Ofcom has handed down fines of around £37m to Royal Mail during the last three years, the MPs said this had failed to deliver the required reform. They also criticised the regulator for failing to investigate whether Royal Mail had de-prioritised letters in favour of parcels.

After a lengthy stand-off with its powerful union, Royal Mail has reached an agreement to roll out changes to its service, including scrapping second-class post on Saturdays, by the end of the year. The company has also pledged to spend £500m over the next five years to improve its service.

Mr Byrne said: “Millions of people are paying the price for a postal service that is simply not delivering. Hospital appointments missed, benefit decision notices delayed, fines arriving too late to challenge.

“These are not minor inconveniences, and they are the consequences of a national service failing to meet the standards the public has every right to expect.”

He added: “Despite years of fines and missed targets, Royal Mail’s performance remains unacceptable and Ofcom has failed to drive the change that is needed at the pace that is needed.”

An Ofcom spokesman said: “As we made clear in our evidence to the committee, Ofcom has acted decisively – not only by using the full extent of our enforcement powers to fine Royal Mail more than £37m for its poor performance, but also demanding a credible improvement plan from the company, backed by investment.

“We’ve also modernised our rules to reflect what people need and give the postal service the best chance of survival.”

A Royal Mail spokesman said: “We know we haven’t always met the standards our customers expect – and we’re fixing that. Over the past year, more than 92pc of letters were delivered on time, and we’re making significant investments to improve reliability.

“We welcome the committee’s recommendation that the Government look at options to level the playing field on employment rights between Royal Mail and competitors, who often rely on low-cost labour models and are taking advantage of gaps in UK labour laws.”

Amazon has been contacted for comment.