RISING prices for stamps and a “degraded” service will combine to lose Royal Mail more customers, a business leader claims.
Steve Leigh, head of policy for the Huddersfield-based Mid Yorkshire Chamber of Commerce, said Royal Mail would be “an accessory to its own demise” if customers faced further increases in postage costs without seeing improvements to the service.
His comments follow fears that Royal Mail will announce an increase in the price of first class and second class stamps next month.
Communications industry watchdog Ofcom has proposed giving Royal Mail the freedom to set its own prices for the majority of its products, including first class letters, large letters and parcels; second class large letters and parcels; metered or franked mail and pre-printed envelopes; and bulk mail.
The price of stamps has risen by double the rate of inflation over the past five years and now stands at 46p for first class and 36p for second class.
The 2010 Hooper Report on the postal sector said mail volumes were expected to continue to decline globally by between 25% and 40% in the five years to 2015 as businesses and residential customers make increasing use of online services and email.
Royal Mail’s letters business made a loss of £120m in 2010/11 and has a significant pension deficit. It is estimated that the cost of the network necessary to meet the “universal service obligation” is more than £6bn a year.
Mr Leigh said: “Businesses have tapped into the latest technology. Instead of posting letters, everyone is using email for urgent communication.
“For urgent packages and documents that require a signature, they will use private carriers.”
He said: “Fifty years ago, businesses received orders by post at 8am. They could process them and send a communication that the customer would receive the next day.
“If the post doesn’t arrive until after lunch, there isn’t enough time to process an order the same day.
“It is very disappointing to see the way the service has degraded and in many ways the postal service will be accessory to its own demise when there are other organisations offering a better service.”
The Forum of Private Business claimed allowing Royal Mail to set its own prices could see the price of a second class stamp rocket by as much as 50% to 55p – while Ofcom proposals could mean “no-limit” increases for the price of first class stamps until 2018.
The FPB said: “Business is the core client area of the Royal Mail today, so it’s quite clear where any substantial price increase in the cost of sending letters or packages will be felt the sharpest.
“Agreeing to Royal Mail’s demands would simply create another cost barrier for small firms who can ill afford more price hikes.
“While we understand Royal Mail is currently a loss-making organisation and action needs to be taken to address this, we don’t believe constant price rises are the way to tackle the issue.
“Constantly increasing prices is no way to reform a service and could actually reduce the number of customers using the postal service.
“Royal Mail needs to improve its efficiency, but not by crude price hikes.”