Royal Mail and the future of the universal service obligation

Royal Mail Group Ltd is the UK’s largest postal operator, the only postal operator currently providing UK wide end-to-end letter delivery services, and the UK’s universal service provider.

Universal service obligation

The universal postal service is essentially the ‘one price goes anywhere’ principle of affordable postal services to all UK addresses. It requires Royal Mail (the universal service provider) to deliver letters to every address in the UK, six days a week, at a uniform price, and parcels five days a week.

The legal basis for the universal service is the Postal Services Act 2011 and the Universal Postal Service Order. The Universal Postal Service Order also sets out the minimum requirements which the universal service provider, Royal Mail, must deliver.

Proposed change to five day a week letter delivery

Royal Mail has recently approached government seeking a change to the universal service obligation, and has asked to move to a minimum five-day delivery service for letters, excluding Saturdays, in place of the current minimum six-day delivery service. They have requested this change in order to protect the sustainability of the universal postal service.

Ofcom, the regulator, in their Review of Postal Regulation, stated that the “overall scope of the USO remains appropriate”.

The Government have said that it does not currently have plans to change the minimum requirements as set out in law.

Postal delays

As the Universal Service Provider, Royal Mail’s performance is measured against a number of quality of service targets it is required to report to Ofcom, and failure to meet these may result in Ofcom imposing a fine on Royal Mail.

Royal Mail has faced a number of challenges including financial performance and industrial action in 2022.  It is not currently hitting most of its Quality of Service targets.

In Jul-Sep 2022, Royal Mail delivered 72.6% of First Class mail the next working day, and 91.3% of Second Class mail being delivered within 3 working days. This is below the current Royal Mail delivery targets, which are set at 93% of First Class mail being delivered the next working day, and 98.5% of Second Class mail being delivered within 3 working days.

Royal Mail also completed 89.87% of delivery routes daily, below their target of 99.9%.

Ofcom carried out an investigation into Royal Mail’s performance in 2021/22 after Royal Mail missed targets in 2021/22. However it did not find Royal Mail in breach of its targets because of the ongoing effect of Covid-19.

Ofcom has said they expect Royal Mail to take steps to restore pre-pandemic quality of service levels.