Royal Mail has warned of a threat to the universal postal service as the company reported falling profits in its half year results.
The company, which was privatised by the government last year, said operation profits before transformation costs were 21 per cent at £279m, down from £353m at the same time last year.
It reported revenue from sending parcels was down 1 per cent to £1.46bn
The 500 year old postal service is facing increased competition as the EU’s Postal Services Directive allowed other companies to enter the market and skim off the profitable business post.
Royal Mail warned the TNT service, branded as Whistl, could reduce revenue by over £200m in 2017-18, and posed a threat to the Universal Service Obligation.
This service can be traced back to Rowland Hill and his Uniform Penny Post in 1837 which revolutionised the way communications were run in the UK and was copied throughout the world. It ensures that the cost of sending and receiving a letter is affordable to everyone and that people aren’t penalised for living in more remote areas. It is particularly valued by villages and the elderly. However it is costly and company run purely for profit would not take on such a task.
In previous decades, the profits made in other areas of the business went to subsidising the universal service. But since the EU forced the opening up of the market to competition without regard for the loss making services Royal Mail provides, this money is not available in the same amount. Business post in particular, and parcel collection in cities as well as a rise in ‘click and collect’ has resulted in a drop in revenue for the historic company.
Revenue from the letter delivery service increased by one per cent to £2.24bn as the company offset falling volumes – down some 3 per cent – by increasing prices.
But there is more bad news on the horizon as its biggest customer, Amazon, it set to launch its own delivery service. Royal Mail say the impact of this on the growth in the parcel delivery sector is a reduction to between one and two per cent, compared to the predicted six per cent growth when the company floated last year.
Moya Greene, chief executive, told The Telegraph: “The UK parcels market remains challenging. As the pre-eminent UK parcels delivery company, we are targeting a number of new, growing areas, and delivered two per cent volume growth in a competitive market.”
Ms Greene added that Royal Mail was “fully prepared” for Christmas, the busiest and most profitable time of the year as cards and presents are sent.
A spokesperson for Royal Mail told Breitbart London:
“The delivery and maintenance of the Universal Service is a cherished public policy objective. A six-days-a-week service, to all 29 million addresses in the UK at a uniform price – which Parliament has determined is an essential service – can only be achieved through a legislative and regulatory framework that is actively supportive of the Universal Service.”
It remains to be seen if the current rules from Brussels allow that framework to be maintained.