Ofcom fines UK’s Royal Mail £10.5mn for poor performance

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UK regulators have fined Royal Mail after the group failed to meet its delivery targets, adding to pressure on the UK postal service as it prepares for a takeover by Czech billionaire Daniel Křetínský.

Ofcom, the communications industry regulator, said on Friday that it had fined Royal Mail £10.5mn for poor performance in its most recent financial year, almost double the £5.6mn penalty it issued the previous year.

The former state-owned group delivered just 74.7 per cent of first class mail within one working day of collection, and 92.7 per cent of second class mail within three working days, Ofcom found, well below targets of 93 per cent and 98.5 per cent respectively.

“With millions of letters arriving late, far too many people aren’t getting what they pay for when they buy a stamp,” said Ian Strawhorne, director of enforcement at Ofcom.

“Royal Mail’s poor service is now eroding public trust in one of the UK’s oldest institutions.”

The regulator’s findings point to the deep set problems at the 508-year-old group, which following privatisation between 2013 and 2015 remains the UK’s largest provider of letter and parcel deliveries.

Royal Mail has failed to meet at least one of its targets every year since 2017/18, although Ofcom did not fine the business during the Covid-19 pandemic, which was found to impact services in ways beyond its control.

The latest penalty highlights the challenge facing Křetínský, who has pledged to modernise Royal Mail following years of fraught relations with postal workers and struggles to adapt to the rise of online shopping.

The billionaire is hoping to complete his £5.3bn takeover of Royal Mail’s owner by the first quarter of 2025. The deal, agreed in May, has been backed by management but is awaiting government approval.

Křetínský, known for his investments in UK supermarket chain J Sainsbury and football club West Ham United, has committed to respect the delivery obligations that Royal Mail has long warned are holding back its service.

Royal Mail’s owner, International Distribution Services, said on Friday that it was “making the necessary changes to deliver for our customers” but it was “essential that these efforts are backed by urgent reform of the universal service”, which requires the group to deliver letters everywhere in the country at the same price six days a week.

Royal Mail has proposed cutting second-class letter deliveries to only three days a week following a steep decline in demand since the advent of email, a move the lossmaking group hopes would save costs.

Ofcom, which is undertaking a review of its rules, acknowledged in September that making this change while keeping first-class letter deliveries six days a week would “enable Royal Mail to improve reliability, make substantial efficiency savings, and redeploy its existing resources to growth areas such as parcels”.

Royal Mail’s delivery targets must be adapted “to a level that meets the needs of today’s postal users, not the needs of customers 20 years ago”, IDS said on Friday.

“This will help create a modern, sustainable and reliable service for future generations.”

Křetínský declined to comment.

Additional reporting by Jim Pickard and Ivan Levingston in London