News

March 30, 2012

First-class post could become unaffordable for small firms, says FPB

First-class post could become unaffordable for small firms under a new pricing regime that has already seen the cost of stamps go up by 30%, the Forum of Private Business (FPB) has warned.

Without the inflation-linked price controls that will limit increases on second-class post between now and 2020, the price of first-class deliveries could “rocket”, forcing small firms to rely on “far slower” second-class deliveries, the small-business group said.

“These changes are bad for business and it will ultimately cost small firms — the bread and butter users of the postal service — far more to send items via first and to a lesser extent second class in the years ahead,” said the FPB’s chief executive, Phil Orford.

Royal Mail and mail regulator Ofcom argued that price rises are necessary to preserve the UK’s universal postal service. Faced by declining mail volumes, the expansion of electronic communication and greater competition from other providers, the organisation has run at a loss of £1 billion over the past four years.

Under the new structure revealed by Ofcom, Royal Mail has been given the freedom to set its own prices, although second-class stamps are to be inflation-linked and capped at 55p until 2020. Second-class packets may also be capped.

The price of first-class stamps for a standard letter immediately went up from 46p to 60p, and second-class stamps from 36p to 50p. Franked mail has risen from 39p to 44p for first class mail and from 28p to 31p for second class. The cost of packet delivery has also changed, with a single cost of £2.70 for first-class packets weighing up to 750g.

Responding to the FPB’s comments, a Royal Mail spokesman said: “We don’t believe customers will switch from first to second class. There’s a range of options available, such as business mail and metered mail. As for price increases, what happens in the future will depend on how this works through — but realistically, we don’t want to lose customers.”

The British Retail Consortium (BRC), which represents the growing number of online retailers who rely on delivery services, recommended that small firms look at alternatives to standard mail, including metered mail and other delivery providers.

Online retailer Sharon Lowe of The Pure Emporia said price changes could force her to look at other delivery services. Using Royal Mail, she currently charges a flat delivery rate of £3.50, whatever the size of parcel, and offers free delivery on orders over £50.

“I’ll have to look at it more in-depth to see if this will actually work in my favour or cost me more” she said. “Maybe I’ll have to increase my prices and my suppliers might charge me more as well. I might have to see if there are any other couriers out there, but I love my postman — he’s great. It’s about weighing everything up.”