Ofcom User Needs Review

Today, Ofcom has published its User Needs Review - an independent assessment of the extent to which the Universal Service Obligation (USO) is meeting the reasonable needs of users of postal services.

The USO means we are legally required to deliver to every UK address on a ‘one price goes anywhere’ basis. We must deliver letters six days a week, and parcels five days a week.

To stay relevant and sustainable, the Universal Service must adapt to life in the 21st century. Ofcom’s User Needs Review has shown that reducing letter deliveries to five days a week would still meet the needs of nearly all people and businesses. In the last six months alone, letter volumes have fallen by around a third. The reduction in letter volumes has had a significant impact on the finances of the Universal Service which lost £180 million in the first half of the year. This, along with our own comprehensive customer research, demonstrates the need to rebalance the Universal Service in line with growing consumer demand for parcels, and lower usage of letters.

We are working hard to improve efficiency and transform our parcels operation. We have increased the automation of parcel sorting and are investing in two new parcel hubs. But at the same time, we recognise that the business has failed to make the progress it would have liked on operational productivity and agree that this must change. Too many parcels are still sorted by hand, and we have not adapted quickly enough to the decline in letters. We’ve taken immediate steps to stabilise business performance and set Royal Mail back on a path towards profitability. But as we have said previously, these measures and the delivery of our transformation plan will not be enough, in themselves, to ensure the USO is financially sustainable in the long term.

Times may have changed a lot, but the Universal Service remains vitally important. With changing user needs, which have been accelerated as a result of the pandemic, there is a clear need to move with the times.

We will consider Ofcom’s findings very carefully. We look forward to engaging further with Government, Ofcom, our unions and other stakeholders to ensure the Universal Service continues to meet the changing needs of consumers, and ensure it remains financially sustainable.