Royal Mail losses widen

In the last 12 months, Royal Mail has experienced a decline in the amount of letters posted which has driven its regulated letters and parcels business into a £200 million loss.

The group unveiled the degree of Royal Mail’s growing financial crisis which is threatening the viability of the universal service which allows people to post a letter anywhere in the country for one price.

The universal service itself has made an estimated loss for the first time of £100 million. Overall losses in the Royal Mail’s regulated business are estimated to have reached £200 million in the 12 months to 31 March 2008, compared with a £29 million loss last year.

The group said it is handling around 3 million fewer letters than it did compared with a year ago and said it faced a time of difficult challenges after the opening up of the postal service.

At the beginning of 2006, the organisation’s 350-year dominance of the market ended as other licensed operators were given the right to collect and deliver mail.

According to Royal Mail, its parcel delivery businesses, GLS and Parcelforce Worldwide, had seen a rise in sales, however, profits had been eaten into by competitive pressures as well as the costs of delivering more mail.

The main difficulty for the Royal Mail is that while it has lost business in the profitable bulk mail collection and sorting market, it still has to support the universal mail delivery service.

Chief executive Adam Crozier said the universal service is a huge asset for Royal Mail and for the nation as a whole.

It is part of the fabric of our society and is vitally important, both to social cohesion and to the UK economy, added Mr Crozier.

However, it is now in the red for the first time. It is vital that we have the opportunity for a real debate about how the universal service should be financed and sustained going forward, he commented.

Finally, Post Office branches remains under threat as the organisation revealed that 4 million fewer people have been visiting a Post Office each week, compared with 3 years ago.