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Royal Mail fined £5.6m for missed delivery targets

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Royal Mail has been fined £5.6 million by the regulator for failing to meet its first and second-class delivery targets, in a blow to the postal service which has been hard hit by strikes and has lost business to rivals.

Ofcom said the postal delivery service breached its obligations by a “significant and unexplained margin” in the 2022-23 financial year.

Figures show that 73.7 per cent of first-class post was delivered within one working day across the year, against a target of 93 per cent, while 90.7 per cent of second-class post was delivered within three working days, compared with the target of 98.5 per cent. The data shows that 89.35 per cent of delivery routes were completed on the required day, well behind the 99.9 per cent target.

The operator has been beset by strikes and affected by extreme weather as well as the closure of the runway at Stansted. The airport closed its runway overnight for weeks at the start of this year for resurfacing works. However, even after accounting for these issues, Ofcom said Royal Mail’s first and second-class performance was still only 82 per cent and 95.5 per cent respectively.

“Clearly the pandemic had a significant impact on Royal Mail’s operations in [the] previous year, but we warned the company it could no longer use that as an excuse, and it just hasn’t got things back on track since,” Ian Strawhorne, Ofcom’s director of enforcement, said. “The company’s let consumers down and today’s fine should act as a wake-up call — it must take its responsibilities more seriously.”

The penalty takes into account a 30 per cent reduction from the sum that would have been imposed after Royal Mail admitted liability and agreed to settle the case. The fine must be paid to the Treasury within two weeks.

International Distributions Services (IDS), Royal Mail’s owner, said it was disappointed by its performance and was taking action to improve.

“Last year was uniquely challenging for Royal Mail,” it said. “Quality of service was materially impacted by the long-running industrial dispute which included 18 days of strike action. We are pleased that Ofcom has acknowledged that elements outside of Royal Mail’s control had a significant impact on service levels.”

The regulator said it did not find any evidence that Royal Mail’s senior management had prioritised parcels over letters but it was concerned that the management appears to have insufficient oversight of some delivery offices where high absence and vacancies had led some customer operations managers making snap decisions on what to deliver. It called for Royal Mail to provide better training in such circumstances.

Royal Mail has lost a tenth of its business to rivals after a year of strikes and it reported a £750 million loss. Its failure to meet its delivery targets has been a long-running problem for the company and the last time it hit its targets was six years ago.

In 2019 Ofcom issued a £1.5 million fine for delivery failures but between 2020 and 2022 accepted the pandemic as a mitigating factor.

Bosses at Royal Mail have repeatedly said the universal service obligation, which requires it to deliver letters six days a week, is out of date after letter volumes fell 30 per cent between 2019 and 2023. However, the government has rejected calls for its reform.

IDS has paid £477 million in dividends to its shareholders since March 2021.

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