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Royal Mail given permission to raise charges and prices Royal Mail given permission to raise stamps by up to 5p
(40 minutes later)
Royal Mail is be able to increase the price it charges business customers and competitors for delivering letters. Royal Mail has been given the green light to raise the cost of a first-class stamp by 5p to 46p next April.
The mail operator should be able to charge up to 15% more, subject to a short, final consultation, the regulator Postcomm said. This would be the largest increase since first-class postage began in 1968.
The higher charges could mean an additional £100m a year to Royal Mail, which is facing falling mail volumes. A second class stamp could rise by 4p, taking it to 36p, under final proposals from regulator Postcomm.
The new, higher costs will affect big business customers such as banks and utilities as well as competitors. Royal Mail will decide next month whether to implement a rise of that magnitude. It currently loses 6.4p for each stamped letter it delivers.
Rivals such as UK Mail collect and sort letters themselves, but have to pay Royal Mail to deliver over what is known as "the final mile", up to people's letterboxes. There have been larger percentage increases, notably in the high inflation 1970s, but a 5p rise on a standard first-class stamp would be unprecedented in cash terms.
Royal Mail says current rules have meant it loses 2.5 pence on each item delivered in this way. Higher charges
Stamp prices up The changes are part of proposals outlined by Postcomm.
Postcomm also confirmed an announcement in May that Royal Mail would be able to increase the price of a first-class stamp from 41 pence to up to 46 pence from April next year. If Royal Mail chooses to increase all the charges up to the maximum allowed, it could mean an additional £380m a year to the operator, which is facing falling profits.
Second class stamps could rise by up to 4p to 36p. Other proposals also allow Royal Mail to increase the price it charges big business customers such as banks and big energy companies for delivering letters.
Although the proposed changes are subject to a two-month consultation, they are expected to go ahead. The mail operator could also be able to charge competitors up to 15% more.
Rivals such as UK Mail collect and sort letters themselves, but have to pay Royal Mail to deliver over what is known as "the final mile" - up to people's letterboxes.
Royal Mail says current rules have meant it loses 2.5p on each item delivered in this way.
New rules
The plans also include the relaxation of some regulations to help Royal Mail compete more effectively with its private sector rivals.The plans also include the relaxation of some regulations to help Royal Mail compete more effectively with its private sector rivals.
Postcomm said the changes would help Royal Mail fund its modernisation programme and help safeguard the one-price-goes-anywhere universal service in the UK.Postcomm said the changes would help Royal Mail fund its modernisation programme and help safeguard the one-price-goes-anywhere universal service in the UK.
Royal Mail welcomed the announcement.Royal Mail welcomed the announcement.
"With mail volumes falling rapidly... it's essential the current regulatory constraints on Royal Mail are eased to allow it to compete fairly in the bulk business mail, and packet and parcel markets, where competition is extremely robust and growing," said chief executive Moya Greene."With mail volumes falling rapidly... it's essential the current regulatory constraints on Royal Mail are eased to allow it to compete fairly in the bulk business mail, and packet and parcel markets, where competition is extremely robust and growing," said chief executive Moya Greene.
Earlier this month, Royal Mail said its half-year profits had fallen by more than two-thirds and its core letters delivery business had returned to making a loss.Earlier this month, Royal Mail said its half-year profits had fallen by more than two-thirds and its core letters delivery business had returned to making a loss.
The mail operator, which is set to be sold off by the government, has long argued for lighter regulation as competitors have won more of the profitable bulk mail market.The mail operator, which is set to be sold off by the government, has long argued for lighter regulation as competitors have won more of the profitable bulk mail market.
But industry insiders believe its problems have more to do with a failure to modernise quickly enough.But industry insiders believe its problems have more to do with a failure to modernise quickly enough.
Postcomm chair Nigel Stapleton said he welcomed the Royal Mail's pledge to improve efficiency as quickly as possible.Postcomm chair Nigel Stapleton said he welcomed the Royal Mail's pledge to improve efficiency as quickly as possible.
But he said he "regrets that the company is unable to do so without making further demands on its customers".But he said he "regrets that the company is unable to do so without making further demands on its customers".