Royal Mail calls for end to price controls after profits col

[TrueBlueTerrier]

Royal Mail calls for end to price controls after profits collapse

http://www.independent.co.uk/news/busin ... 24751.html

By David Prosser, Deputy Business Editor
Friday, 9 May 2008

Royal Mail's chief executive, Adam Crozier, is to call for price controls in the market to be lifted after revealing that the company lost £200m on its regulated letters and parcels business last year.

The loss, which resulted in a 30 per cent collapse in Royal Mail profits, was announced yesterday, less than 48 hours after an independent investigation into deregulation of the postal market said the reforms had delivered no benefits to most customers and put the finances of the state-owned company under severe strain.

"It is vital we have the opportunity for a real debate about how the universal service should be financed and sustained," Mr Crozier said. "It is a part of the fabric of our society and vitally important both to social cohesion and the UK economy, but it is in the red for the first time."

An interim report from the Government-commissioned review of the deregulation of mail services in 2006 warned this week that only large businesses were benefiting from competition and that the statutory requirement on Royal Mail to offer daily deliveries to every address in the UK would cause it substantial financial problems.

That conclusion appeared to be supported by the publication yesterday of Royal Mail's 2007 results, which showed the universal service lost £100m last year. A further £100m was lost on other areas of Royal Mail's business where prices are controlled. Overall, the company made profits of £162m last year, compared with £233m in 2006.

Despite Mr Crozier's warning, Postcomm, the industry regulator, pointed out that Royal Mail had already been allowed to raise the cost of stamps ahead of inflation and said it believed the current level of price controls governing the company was appropriate. "Royal Mail now needs to raise its efficiency levels and cut its costs," a spokesman said.

However, Royal Mail is currently most taxed about the regulation of its services to larger businesses, where it now faces significant competition from around 20 rival suppliers. While the company is free to set prices for services in this area as it sees fit, it has to offer the same price to all businesses on each of its tariffs. It is also required to offer rival services access to its delivery network, at a cost fixed in relation to the charges it makes its own customers.

Mr Crozier believes these restrictions reduce the competitiveness of the business services offered through Royal Mail Letters, undermining the company's ability to subsidise the universal service.

Allan Leighton, Royal Mail's chairman, claimed the company had already made huge strides in modernising, with a deal on working practices finally agreed with staff last year following a long-running dispute. He added: "However, the company continues to face significant risks, which unless tackled will impact on its performance."

The Government's review of deregulation is due to conclude later this year but has already said the status quo should not be allowed to continue.

Nevertheless, relaxation of regulation of Royal Mail is likely to be stiffly contested by both Postcomm and the company's commercial rivals, such as UK Post and TNT, which are facing similar market pressures. The overall size of the mail market in the UK is declining as the internet replaces both personal and business mail. More people pay bills online or by direct debit, and businesses have moved away from direct mailshot activities towards online marketing.

While Royal Mail's rivals now collect and sort a fifth of all mail in the UK – before paying Royal Mail to deliver much of it – they insist they still need protection from the former monopoly. Nick Wells, chief executive of TNT Post, said: "Competitors need a strong regulatory regime to ensure fair competition, including protection on the difference between retail and wholesale prices."

Interesting? C

[DGP1]

Overall, the company made profits of £162m last year, compared with £233m in 2006.

How much did RM say the strike had cost them?? Was it £50 or £100 million and how much did they put into the pension fund??

[plodsie]

While Royal Mail's rivals now collect and sort a fifth of all mail in the UK – before paying Royal Mail to deliver much of it – they insist they still need protection from the former monopoly. Nick Wells, chief executive of TNT Post, said: "Competitors need a strong regulatory regime to ensure fair competition, including protection on the difference between retail and wholesale prices."

Much of it?? It's damn near all of it. Wells has already came away with the comment:"We're Royal Mail's biggest client!" notice the word competitor has now disappeared. There is no competition, what is it that Postcomm et al cannot understand about that?

[majeed]

The problem lies in the requirement for the "Universal Postal Service": is there really a need for a delivery EVERY DAY???

[andy2007]

The problem lies in the requirement for the "Universal Postal Service": is there really a need for a delivery EVERY DAY???

YES Of course there is a need for the USO. Not just the ability to Post to anywhere in the Country for the same price. But also the daily deliveries.

Just because people aren't sending many Letters, doesn't mean that they aren't using the Post. I can't remember, the last time I posted a letter. But I often send, and recieve items through the Post. How do you think things get to you, when you order on-line?
How many individuals, sell on a small scale, on Ebay?
How many Birthday, and Christmas Cards get sent every year?

The USO must be protected!

[TrueBlueTerrier]

The problem lies in the requirement for the "Universal Postal Service": is there really a need for a delivery EVERY DAY???

Yep - especially with this Credit driven society we live in now. How many claims would Royal Mail get if it removed daily deliveries and caused Credit Card bills or Invoices to arrive late and thereby causing the customer to incur late payment fees.

On a practical level even if we phased out 1 day per week, the volume of mail on recommencement would be barely operationally feasible for 1 postie to be able to complete by themselves. Just look back to Yesterday which was for me a banger of a day caused because Monday was a bank holiday. So on paper and superficially the suggestion may have some good points, however in the day to day world its a definite non goer for me.

[majeed]

Looking at the issue, what with the Government now being prompted to look into the efficacy of "opening up the market" (and ending Royal Mail's monopoly on letters), I would have to say that it has been shown that the financial behemoth which was Royal Mail no longer exists, competition seems to have made no real benefit to the letters side of the business and therefore, Royal Mail should now be renationalised and the market once again closed. That seems to be the only solution, given the fact that de facto, you MUST pay a postman X amount of money, regardless of anything else, as he has to exist/ subsist/ live/ survive and you MUST have a universal, daily delivery.

A level playing field for a critical and pivotal organisation - part of the fabric of the country's infrastructure - that has been finely tuned over four hundred years is just not going to happen. Who would ever think otherwise?

[andy2007]

Oh, if only we could be renationalised! It would bring back the Service mentality, to running RM. Unfortunately, things have gone much too far now. If the Government was to withdraw the licenses for the so-called Competition, to operate. The compensation claims, would be massive.

Don't forget: These Companies, have invested millions of Pounds, getting their operations up and running. They aren't likely to walk away from it, without making a profit, from compensation claims.

What RM should have been doing for some time, is advertising. I know, we have lots of adverts for POL. But what about the rest of RM?
When did you last see an advert for Royal Mail, products?
The last one I remember, was the one with Elton John in. And that was quite a while ago!

Ok, there was some advertising, when we introduced Pricing in Proportion. But as I have said before: How many of us still send Letters on a regular basis?
We send small Parcels (e.g. CDs). But when was the last time, any of you sent a Letter to someone?

It's way past time, that RM's marketing Department, woke up and smelled the Coffee! If we don't concentrate more, on getting a bigger slice of the Market, in Parcels, big, and above all, small. It will only be a matter of time, before we suffer catastrophic damage to our Service.

In our WTLs, we often get told, what Contracts we have lost to the Competition. But are only told about new Customers we get. They never tell us, when people come back to us, because they were let down by the Competition. We find that out for ourselves, when we see the Cage Cards.

It just seems like they want us to believe that we have no chance of survival, without continuous cuts. When the fact is, that we know very well, that we are still capable of doing so much more, if we are allowed to.

[k979aaa]

It's called the bunker mentality while the competition close's in inexorably we all suffer they stick their head's in the sand and hope it will go away their is only one way out of this mess and these two must go and go NOW :cfo & :lfo

[andy2007]

There's no point, unless we get rid of New Labour as well. They are the ones encouraging Leighton and Crozier, to continue to damage our once great Public Service. If we replaced them, Brown would simply appoint replacements, who would continue the Job.

[max_gain]

Shame humpty and DUMpty did not make a stand, contest, or just do something when mr regulator screwed our pricing structure for DSA.

[majeed]

...If the Government was to withdraw the licenses for the so-called Competition, to operate...

It's absolutely crazy that Royal Mail is owned by the government and the government gives a cut to other businesses. It doesn't make good business sense. That's the anomaly of Royal Mail: it is a business - but it isn't. What can you do with a "business" that is married with hundreds of years of legislation? It's a strange beast...

[k979aaa]

...If the Government was to withdraw the licenses for the so-called Competition, to operate...

It's absolutely crazy that Royal Mail is owned by the government.

It would be even worse if these two :cfo & :lfo owned it.

[majeed]

...What RM should have been doing for some time, is advertising..."

I agree: we are all aware of the opportunities that our teams have taken as a whole to introduce businesses to products which they were unaware of, and which saved them time and money. We could easily use the sides of vans and perhaps the bags we all carry around to advertise products, in much the same way as some supermarket chains do. We could also do business information drops ourselves: it would be dead easy.

[majeed]

...smelled the Coffee!...

> you have to pay at least 30p to smell the coffee in the delivery office where I work - that's for both with and without sugar.