ROYAL MAIL is to lose its grip further on the UK market earlier than expected under a ruling to be announced by the industry regulator today.
An early arrival of competition across all postal services will be a fresh blow for an organisation that has recently faced a wave of controversy over poor service.
Nigel Stapleton, chairman of Postcomm, is expected to hit Royal Mail with an earlier timetable than the 2007 deadline which had previously been set for the full opening of the market. Mr Stapleton is likely to demand faster progress on giving ground to rivals because Royal Mail is now in a more financially robust state than it was when the original programme was set. Full competition could then arrive next year or the year after.
So far competition has been restricted to some parts of the Mail’s business service, which makes up about one third of the postal market by value. Next April it was due to lose another third by value with the loss of more business post. But that is likely to be extended radically, and soon all parts of the postal market, including ordinary domestic post, will be open to competition.
The regulator is keen to make the market more competitive and is disappointed about the number of rivals that have entered the market. He thinks that if the market is opened more quickly, more businesses might be encouraged to participate.
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When the timetable was first set Royal Mail was losing more than £1 million a day but it is now profitable.
Royal Mail is also likely to face pressure over its privileged VAT position, whereby it does not have to charge VAT on its services but its rivals do, because the regulator fears that this is inhibiting a proper market.
Other postal businesses have been lobbying the Treasury for years to get the exemption overturned.
And in a third attack, the state-owned group could face tougher service targets with new pricing proposals. The regulator will today begin a lengthy consultation process over new prices to come into effect from 2006 and is likely to emphasise the importance of service targets. Royal Mail has constantly fallen short of the targets that make up part of its licence obligation.
Critics have said that Royal Mail has become so focused on trying to restore its profitability that it is sacrificing service. Next year it is aiming to make £400 million in operating profits, which is the target for the three-year recovery plan begun in 2001 by Allan Leighton, the organisation’s chairman.
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Royal Mail declined to comment on the regulator’s expected move although the group is unlikely to be pleased by the plan. The Communication Workers Union, the main postal union, is also likely to criticise any plans to accelerate a competitive market because it fears that more competition will put pressure on Royal Mail to cut jobs.