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MPs hold inquiry into Royal Mail delivery obligations MPs hold inquiry into Royal Mail delivery obligations
(about 21 hours later)
MPs have launched an inquiry into claims that Royal Mail will struggle to fulfil its obligation to deliver to every address in the country six days a week for the same price due to intense competition in profitable areas.MPs have launched an inquiry into claims that Royal Mail will struggle to fulfil its obligation to deliver to every address in the country six days a week for the same price due to intense competition in profitable areas.
The business select committee launched its investigation on Wednesday following pressure from Royal Mail executives who complain that rival operator TNT is able to cherry-pick profitable delivery routes in big cities while Royal Mail must provide the same service to all 29m addresses in the country as part of its legally binding universal service obligation. The business select committee launched its investigation on Wednesday following pressure from Royal Mail executives who complain that rival operator Whistl, formerly known as TNT Post, is able to cherry-pick profitable delivery routes in big cities while Royal Mail must provide the same service to all 29m addresses in the country as part of its legally binding universal service obligation.
Adrian Bailey, chair of the business select committee, said: “We have had a number of representations from Royal Mail, and others, warning that TNT can cherry-pick profitable routes because they don’t have a universal service obligation. If it [the universal service] is under serious threat, we will see what we can do to protect it.”Adrian Bailey, chair of the business select committee, said: “We have had a number of representations from Royal Mail, and others, warning that TNT can cherry-pick profitable routes because they don’t have a universal service obligation. If it [the universal service] is under serious threat, we will see what we can do to protect it.”
Royal Mail is committed to maintaining the universal service until at least 2021, and any change beforehand would have to be put to a vote in parliament.Royal Mail is committed to maintaining the universal service until at least 2021, and any change beforehand would have to be put to a vote in parliament.
Bailey said Royal Mail, TNT, the CWU postal union and regulator Ofcom will be called to give evidence in parliament. Bailey said Royal Mail, Whistl, the CWU postal union and regulator Ofcom will be called to give evidence in parliament.
Bailey said it was worrying that the potential threat to the universal service was raised soon after Royal Mail’s controversial privatisation last year. In the runup to the sell-off, Vince Cable, the business secretary, insisted that privatisation would not affect the universal service.Bailey said it was worrying that the potential threat to the universal service was raised soon after Royal Mail’s controversial privatisation last year. In the runup to the sell-off, Vince Cable, the business secretary, insisted that privatisation would not affect the universal service.
In Royal Mail’s first results as a private company six months after its flotation on the stock market, chief executive Moya Greene warned that TNT’s ability to pick off profitable routes in big cities was “striking at the economics of the universal service obligation”. In Royal Mail’s first results as a private company six months after its flotation on the stock market, chief executive Moya Greene warned that rivals’ ability to pick off profitable routes in big cities was “striking at the economics of the universal service obligation”.
“TNT Post UK can cherry-pick easy-to-serve urban areas, delivering easy-to-handle post to homes less frequently than Royal Mail and to no defined quality standard,” she said. “Royal Mail is required to deliver six days a week, overnight, throughout the whole country, to stringent quality standards and at a uniform, affordable tariff. Everyone should really sit up and take notice of what effect this cherry-picking will have.”“TNT Post UK can cherry-pick easy-to-serve urban areas, delivering easy-to-handle post to homes less frequently than Royal Mail and to no defined quality standard,” she said. “Royal Mail is required to deliver six days a week, overnight, throughout the whole country, to stringent quality standards and at a uniform, affordable tariff. Everyone should really sit up and take notice of what effect this cherry-picking will have.”
She said Royal Mail subsidised expensive deliveries to rural areas with the profits it made from services in big cities, and any increased threat from rivals could cost it £200m in revenues by 2017.She said Royal Mail subsidised expensive deliveries to rural areas with the profits it made from services in big cities, and any increased threat from rivals could cost it £200m in revenues by 2017.
Canada Post, where Greene was chief executive until she joined Royal Mail in 2010, earlier this year announced plans to phase out some door-to-door deliveries.Canada Post, where Greene was chief executive until she joined Royal Mail in 2010, earlier this year announced plans to phase out some door-to-door deliveries.
Greene called for “timely regulatory action” from the regulator Ofcom to prevent undercutting from rivals threatening the universal service.Greene called for “timely regulatory action” from the regulator Ofcom to prevent undercutting from rivals threatening the universal service.
Ofcom, which is expected to conduct a review of the impact of competition on the universal service by the end of 2015, has said “current evidence clearly shows that the service is not currently under threat”.Ofcom, which is expected to conduct a review of the impact of competition on the universal service by the end of 2015, has said “current evidence clearly shows that the service is not currently under threat”.
TNT has launched “final mile” delivery services in London, Manchester and Liverpool, and plans to deliver to up to 42% of all addresses by 2017. Whistl has launched “final mile” delivery services in London, Manchester and Liverpool, and plans to deliver to up to 42% of all addresses by 2017.
Shares in the Dutch firm fell 10% on Wednesday after it warned that slow economic growth across the continent would hit profits. It was also setting aside €50m to settle a pending fine from French competition authorities over alleged anticompetitive behaviour. Whistl was unable to comment immediately on Wednesday, but a spokesman has previously said: “We are happy to take any opportunity to explain the benefits of competition in the UK postal sector and its important role in ensuring Royal Mail continues to work towards meeting its productivity targets, which it has so far failed to do.”
TNT was unable to comment immediately on Wednesday, but a spokesman has previously said: “We are happy to take any opportunity to explain the benefits of competition in the UK postal sector and its important role in ensuring Royal Mail continues to work towards meeting its productivity targets, which it has so far failed to do.” • This article has been amended to reflect the fact TNT Post has changed its name to Whistl.