New RM freedoms 'could drive businesses cheaper alternatives

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New Royal Mail freedoms 'could drive businesses to cheaper alternatives'

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The commercial direct mail sector has responded with "dismay" to Royal Mail's new freedoms to set the price of stamps.

The Direct Marketing Association (DMA) said changes to Royal Mail's pricing structure, which comes after Ofcom, the communications regulator, removed price controls from first-class stamps, could drive businesses to cheaper alternatives.

The Forum of Private Business (FPB) said it would "almost inevitably" mean that first-class charges would become unaffordable for many small firms and force them to rely on the second-class system, which is far slower.

From April 30th, businesses will pay 60p for each first-class stamp they use and 50p for each second-class stamp they use.

The changes will mean companies and consumers will benefit from a universally-priced and affordable postal service, Ofcom said.

The changes to price limits are needed because the future of the UK's postal services was at "severe risk" as people increasingly switch to email, text and online messaging as means of communication, the regulator said.

Currently, a first-class stamp costs 46p and a second-class stamp costs 36p.

Royal Mail chief executive Moya Greene said despite the tough economy the company had "no option" but to raise prices.

Mike Lordan, chief of operations for the DMA, said: "Royal Mail now has the freedom to change, prices and terms and conditions without any statutory notice requirement. Commercial users now have little in the way of power to dispute any changes that affect their business."

Mr Lordan said he hoped Royal Mail uses its new commercial freedom responsibly by listening to its customer before implementing any changes.

"Otherwise, granting Royal Mail the ability to raise its prices without consultation will drive more and more businesses away from mail to cheaper alternatives, which is concerning as mail volumes are already declining year on year," he said.

Phil Orford, FPB chief executive, said the changes will be "bad for business" and would ultimately cost smaller firms far more to send items via first class.

"If Ofcom thinks it can give Royal Mail these new freedoms and prices won't immediately go up, it is deluded. This will merely prove to be yet another increase in the cost of doing business for SMEs," he said.