October 21, 2011

Royal Mail free to set prices

by Jan Harris

Postal regulator Ofcom is allow the Royal Mail Group to set its own prices for most of its products, including first-class post which was previously adjusted according to the RPI measure of inflation.

However, there will be a cap on the price of second-class stamps, to ensure people on low-incomes will still be able afford the service.

With volumes mail falling and costs rising, it seems likely that company will now bump up the price of 1st class postage in order to increase revenues.

The move by Ofcom is seen by many as a key step towards the privatisation of the Royal Mail and will help the company compete against delivery firms such as DHL and TNT.

A price of a first class stamp is currently 46p, while a second class stamp costs 36p.

The cost of second class stamps for letters will be capped at 55p plus inflation, which still represents quite a hefty increase.

Royal Mail Group reported a £141 million fall in operating profit to just £39 million for 2010-11, compared with £180m for the previous year.

Core mail volumes fell by 4 per cent, contributing to a fall in revenues to £9.2 billion, compared with £9.3 billion in 2009-10.

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