Royal Mail predicts cheaper parcel post in the next year as profits fall 16%

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Royal Mail has predicted that customers will enjoy cheaper parcel post in the coming year, as capacity in the market continues to put pressure on prices.

The UK’s privatised postal business struck a confident note ahead of the crucial Christmas season, as it reported a “resilient” performance and said that operating costs had been reduced by 1% and could fall further in the full year.

The market reacted well to the results with Royal Mail shares climbing 6% to 481.3p.

On slightly lower revenues of £4.4 billion for the first six months of the year, adjusted pre-tax profits fell by 16% to £240 million after significant investment in the business and redundancy costs.

The postal company is facing severe competition in the parcels business but managed to increase parcel volumes by 4%.


When the company floated it said that it anticipated the parcel market to grow at about 4 to 5% a year, but it is now only seeing growth of 1% - 2% a year.

“Online shopping is here to stay and we don’t see that changing in the medium term.

“The structural change is Amazon’s decision to build its own delivery network, that is taking out a lot of parcels that were available to the industry,” chief Moya Greene said.