Index of Postal Freedom   Britain (Click here for a printer-friendly version) Overview Britain’s national post -- Royal Mail -- traces its roots to the 16th century and the reign of Henry VIII, but its modern iteration was effectively chartered in 1969. Each working day, Royal Mail delivers 62 million items to 28.8 million addresses. About 163,000 people work directly for Royal Mail Group -- more than 60,000 fewer than in 2002. In fiscal year 2010-11, which ended in March 2011, Royal Mail Group posted revenue of £9.2 billion and operating profits of £39 million -- a decline of £141 million over the previous year. Overall revenue, however, declined by £193 million and mail volume declined by 4 percent. Royal Mail’s core postal operations are lagging. The postal group lost £120 million in 2010-11, after making £20 million in profits the previous year. Experts predict that mail volume will decline by 5 percent each year, and postal officials have hinted that 20,000 jobs may be axed. A postal reform bill -- the Postal Services Bill -- passed in June 2011 set Royal Mail on the path toward privatization.     Liberalization Britain’s postal markets were opened to full competition on Jan. 1, 2006, three years ahead of the European Union’s goal of full postal liberalization by 2009. Liberalization has been good for Britain’s economy. A 2008 study by Europe Economics showed that competition in the postal sector created 3,300 new jobs and boosted the British economy by £229 million.  Privatization Despite the opening of postal markets, Royal Mail remains government-owned and received public subsidies to the tune of £150 million in its 2010-11 fiscal year. Royal Mail claims that it needs government subsidies to maintain its network of over 11,800 post offices. The U.K. government has also committed £1.34 billion of public money over four years to help the post office network modernize. The European Commission has investigated state subsidies to Royal Mail in accordance with its rules on State Aid. In December 2008, the British government released a report that called for the partial privatization of Royal Mail. Entitled “Modernise or Decline,” the so-called Hooper Report noted that Royal Mail was the only post in Western Europe to lose money. The report cited a shrinking mail stream and strikes as reasons for dwindling revenues. The report also found that “in 2007, the postal sector accounted for 60 percent of the days lost to industrial action across the whole [British] economy.” The report concluded that the government should transfer a 30 percent stake in Royal Mail to a private postal firm, and assume responsibility for Royal Mail’s pension liabilities, which had reached £4.5 billion by March 2011. In 2010, pension liabilities were £8 billion. Changes in accounting were responsible for the significant improvement in the organization’s pension outlook. In June 2011, Parliament passed the Postal Services Bill, which restructured the company’s balance sheet in hopes of making it attractive for future sale. It also rid Royal Mail of its historic pension deficit by offloading it onto the government. Ultimately, Royal Mail hopes to sell up to 90 percent of the postal operator to a private company, leaving the remaining 10 percent for its employees. In a June 2011 interview following the passage of the bill, Alex Walsh, head of postal affairs for the Direct Marketing Association, stated, “While the new legislation will render Royal Mail a more attractive proposition for interested investors, we’re concerned that competition will suffer. There’s also no incentive for Royal Mail to improve efficiencies or cut costs. So it’s highly likely that commercial mailers will be saddled with price increases along the line.”   Competition Despite liberalization, competition has yet to fully take hold. Royal Mail is still the dominant actor in the British postal market. Currently, 59 firms are licensed to deliver mail in Britain, including the Royal Mail. However, most competitors only collect and process mail while still paying Royal Mail to handle delivery. Royal Mail executed 6.4 billion of these last-mile “access” deliveries in fiscal 2009-10, an increase of 20 percent over the previous year. That means that more than one in three letters was posted in 2009-10 by a competitor but delivered by Royal Mail. This access mail accounts for half of Royal Mail’s business mail volume. Given Royal Mail’s government-owned status, taxpayer subsidies, and dominant market share, the playing field is not entirely level. An independent regulator is tasked with ensuring that Royal Mail does not abuse its market position when competing with other postal operators.   Regulation The Postal Services bill changed the regulatory structure of the U.K. postal market. The Postal Services Commission’s (Postcomm) tenure as regulator ended October 1, 2011. The communications regulator Ofcom took its place. The regulator’s duties are largely the same: ensuring that the universal service guarantee is upheld and overseeing licensed postal operators. Ofcom enjoys greater policing powers over licensed operators than did Postcomm. Like Postcomm, Ofcom regulates Royal Mail’s prices and its quality of service. A first class stamp runs 46 pence, and a second class stamp is 36 pence. Royal Mail’s competitors are free to price services as they please, even if lower than the regulated price. If other licensed operators are accused of anti-competitive behavior, their cases are referred to the Office of Fair Trading under general British competition law. Royal Mail is obligated to offer its competitors access to its vast network on a “fair and reasonable basis.” In other words, all Royal Mail’s competitors must be able to negotiate for use of the universal service provider’s delivery system, if they wish.   Consumer Protections Consumer Focus claims to “champion” consumers’ interest; it absorbed the old Postwatch, an independent consumer watchdog for postal services in the United Kingdom, in 2008. The group has a statutory responsibility to monitor Royal Mail’s performance and advises the regulator on action to take if Royal Mail violates the terms of its license or fails to meet the performance targets set for it by the regulator. Consumer Focus is also active on local or more parochial issues, such as the closing of post offices, local delivery problems, and product trials in certain areas. Consumers can employ Consumer Focus’s services in pursuing their own complaints about mail service.   Universal Service Royal Mail provides the United Kingdom’s “universal postal service,” which includes the flat-rate stamp and the obligation to deliver letters to every UK address, 6 days per week. It must deliver parcels 5 days per week. Its competitors need not fulfill a universal service obligation. Five service areas are required under the universal service obligation, with postage at a flat rate: - Priority and non-priority mail services, or more commonly, general letters and packets; - Non-priority parcel service for packages up to 20 kg; - Registered and insured services; - Support services for ensuring the safety and integrity of mail, including mail forwarding for up to 12 months; - International outbound service. Bulk mail was removed from Royal Mail’s universal service obligation in August 2011. Controversially, in mid-2011, Royal Mail asked for permission to leave mail that required an absent addressee’s signature with neighbors. Consumer Focus said that it was “unconvinced and unimpressed” with the proposed move.   Non-Postal Services With revenue from letters and other traditional postal services trending downward, Royal Mail has expanded into several non-postal commercial activities. Through the Post Office, Royal Mail sells life, travel, and other vehicle insurance policies and provides several basic savings tools. The company also offers personal loans, mortgages, and other basic financial services. It even sells broadband and phone services. Consumers can also handle passport business and pay car taxes at the Post Office. Since launching online savings accounts in August 2010, the Post Office has attracted £4 billion in deposits.  Useful Links Royal Mail Group Website Postal Services Act of 2000 PostWatch Website PostComm Website Royal Mail's FY 2007-08 Annual Report HellMail UK and European Postal News