Stamp prices look set to rise again as Royal Mail faces £120m bill after budget tax raid
Royal Mail has warned of more price rises following the Chancellor’s National Insurance raid.
Martin Seidenberg, head of parent company International Distribution Services (IDS), said it would have to raise prices to offset the £120 million hit from measures unveiled in the budget last month.
The 508-year-old postal service has already increased the cost of a first class stamp three times a year, from £1.10 to £1.65.
Seidenberg said the hike in national insurance – effectively a tax on jobs – would hit hard because it employs around 130,000 people.
Rises: Royal Mail owner IDS said the delivery group would have to increase prices to offset the £120 million hit to the company from measures unveiled in the Budget last month
“The cost environment is deteriorating just when we need to invest,” he said. ‘As a major employer, the changes to National Insurance will have a disproportionate impact on our business compared to the competition.’
He added that the company was considering “all possible measures”, including more automation in its sorting offices, and declined to rule out job losses.
“It’s too early to say what we’re going to do,” he said. “They’re about pricing, cost efficiency and other ways we can make progress. Anything that would impact our people would be a last resort.”
That drew a rebuke from the Communication Workers Union (CWU), which represents around 100,000 Royal Mail employees.
The union said IDS was trying to portray Royal Mail ‘as a basket case’ and ‘create a false narrative’ as an excuse to reduce staff levels.
The clash comes at a critical time for Royal Mail, which faces an uncertain future following a takeover this year of Czech tycoon Daniel Kretinsky. The energy baron, nicknamed the ‘Czech Sphinx’, controls almost 28 percent of IDS through his vehicle Vesa Equity.
If a £3.6 billion bid is approved by the government, Royal Mail will fall into foreign hands for the first time since it was founded by Henry VIII in 1516.
Royal Mail reported a loss of £67m in the six months to September, a substantial improvement on the £319m loss in the same period last year.
IDS, which also owns profitable international delivery network GLS, reported a total half-year profit of £61 million, compared with a loss of £169 million in 2023.
Royal Mail was brought to its knees during a series of strikes in 2022 and 2023, which caused serious disruptions to deliveries and left the company cash-strapped.
While he expected Royal Mail to make a profit for the year, Seidenberg said price increases were being considered across the board, including parcels and business mail, to offset the huge tax increase announced in the Budget.
He added that changes to Royal Mail’s universal service obligation are now ‘even more urgent’. The legal obligation requires Royal Mail to deliver letters across Britain six days a week for a single price.
But the company has pushed for reforms, arguing that a sharp drop in the number of postal letters means the service is no longer fit for purpose and costs millions of pounds a day.
Talks of price increases also threaten to intensify criticism of Royal Mail’s already high postage costs, with reports this week suggesting it would be cheaper to fly to Europe and post Christmas cards from other countries to the UK than via domestic first class mail.
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