Postal watchdog believes 'radical transformation' is necessary for Royal Mail

Postcomm, the independent regulator for postal services, has called for the privitisation of the Royal Mail believing that services can only be improved 'through a radical transformation of governance and structure'.

Postcomm concluded in its submission to the independent review of the postal market that Royal Mail’s current business model is unsustainable and that, unless some bold actions are taken very quickly, it is highly likely that its letters business will move to a position of managed – but accelerating – decline.

Postcomm also stated that with the mail market now in structural decline, because of the increasing impact of e-mail and the Internet, Royal Mail needs access to private capital and a stronger set of incentives to enable it to restructure and become more profitable.

The transformation of Royal Mail will ensure a more dynamic mail market that can respond quickly and effectively to changing customer needs as mail increasingly is challenged by electronic media.

Postcomm believes competition and liberalisation should continue to be promoted as they are delivering far better customer focus and strong incentives for all mail operators to innovate and to become more efficient. Competition has already benefited large customers, and choice is now becoming available to smaller businesses. The regulator also urges the removal of artificial barriers to postal market entry – including the removal of new entrants’ VAT disadvantage – which could encourage wider competitor involvement in the collection, sorting and delivery of mail.

Postcomm chairman Nigel Stapleton said, “Postcomm’s primary duty is to protect a universal postal service. A high quality universal service must be maintained and Postcomm is determined to do all we can to ensure it continues to meet the needs of customers.

“The company also needs access to private capital to fund and incentivise a radical transformation of the business. Postcomm wants to see the Government and Royal Mail embrace a partnership approach with the private sector to secure a universal service valued by all users and provided at least cost, without public funding.

“Royal Mail can only provide an internally funded universal service if it has the funding to restructure and become the best in class operator that it aspires to be and if it is no longer saddled with having to pay down an enormous pensions deficit. None of us want to see either of the two other possible outcomes: a universal service that becomes an ever greater burden on the taxpayer or one where there is a substantial threat to its specification.”

May 23, 2008