Royal Mail seeks price rise for bulk business post

20 October 2010

19 October 2010 | Angeline Albert

Royal Mail wants to raise its prices for bulk business post to cope with a rapid slump in the mail market.

The company has asked the postal services watchdog Postcomm to allow it to increase the price of its business mail products above the levels permitted in the existing price control. The price rise has been requested for one year only but would not apply to first and second-class stamps or non-bulk mail.

The Federation of Small Businesses (FSB) said firms would be forced to swallow Royal Mail’s price hike and suffer the consequences. Chief spokesman Stephen Alambritis said: “It is an unwise move Royal Mail is taking. Small businesses rely on Royal Mail to meet their business needs such as delivering marketing material. This will punish Royal Mail’s loyal customers. It will put up their costs which they can’t pass on to customers.”

Royal Mail expects the move to generate an extra £100 million in revenue in 2011/2012. Royal Mail made a £157 million operating loss after exceptional items last financial year, 2009-10. This was largely blamed on “access” mail – the letters, packets and parcels collected by its rivals but delivered by Royal Mail’s postmen and women. More than one in three of all letters delivered by Royal Mail is an access item. Coupled with this, there has been a fall in mail sent by the general public.

Moya Greene, Royal Mail Group’s chief executive, said: “What we are asking for is the chance once and for all to charge a fair price to other companies who use our network to carry mail and to end what is, in effect, the substantial built-in subsidy that our rivals have enjoyed for years.”

If Postcomm decides to consider Royal Mail’s price application, there would be a public consultation. If the regulator then approved the application, the additional price rises would come into effect in April 2011.

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