Royal Mail might soon get the go-ahead to drop Saturday letter deliveries after regulator Ofcom confirmed it was starting a review of the Universal Service Obligation (USO).
At present, IDS-owned Royal Mail has to deliver letters to all UK addresses six days a week at affordable prices, a service obligation it has it has argued repeatedly is outdated and “in need of urgent reform”.
Ministers turned down the company’s calls for the USO to be overhauled in June, but it seems there has been a change of heart.
In a statement, Ofcom said: “Universal service has been unchanged since the implementation of the current framework under the Postal Services Act 2011.
“However, consumer demand for postal services has changed substantially and continues to do so. So, Ofcom is gathering evidence on how the universal service might need to evolve to more closely meet consumer needs.”
The regulator said letters remain important but volumes had declined by 46% over the last decade, as people and businesses increasingly use digital alternatives.
“And as the number of letters delivered each day falls, the average cost of delivery is increasing.
“We therefore believe that now is a good time to consider the longer-term future of the universal service, ahead of any future review of the regulatory framework.”
Roya Mail said it was welcome that Ofcom is looking at options for the future of the USO and the recognition that it needs to evolve to reflect the changing needs of postal users.
The company is expected to lose close to £300 million this year with its business hit by declining letter volumes and prolonged strike action.
Workers eventually accepted a 10% pay rise but analysts say this had put even more pressure on costs and scrapping Saturday deliveries to focus solely on parcels at the weekend is one of its likely options.
Royal Mail has complained that the USO has allowed rivals to undercut it for last-mile services by cherry-picking the best areas such as densely populated city centres.
Shares in IDs rose 1.2% to 240.6p.