Royal Mail boss: Universal service is ‘simply not sustainable’
- Martin Seidenberg recently said Royal Mail may need a taxpayer bailout
- Royal Mail delivered 387 million parcels in the three months ending in December
Royal Mail’s parent company had its best Christmas for four years in 2023, but its boss has warned that the postal service is not sustainable in its current form.
Martin Seidenberg, the CEO of International Distributions Services, said it was “simply not sustainable” for the Royal Mail to run a delivery network built to handle 20 billion letters when it currently only delivers 7 billion letters.
Seidenberg has previously said the Postal Service may need a taxpayer bailout to stay afloat amid a continued decline in letter volumes.
Not fit for purpose: IDS chief executive Martin Seidenberg recently said it was ‘simply not sustainable’ for the Royal Mail to run a delivery network built to handle 20 billion letters
In a letter to MP Liam Byrne: As chairman of the Business and Trade Select Committee, he said that within five years Royal Mail will deliver 3 billion fewer letters annually and serve more and more addresses, leading to higher delivery costs.
Seidenberg, who became CEO last August, suggested raising prices “significantly” or receiving a “government subsidy” to help turn things around.
He also wants media regulator Ofcom to reform the Universal Service Obligation, which requires Royal Mail to deliver letters Monday to Saturday.
Seidenberg told investors on Thursday: ‘With Ofcom set to soon publish options for the future of the Universal Service, now is the time for urgent action.
“We are doing everything we can to transform, but it is simply not sustainable to maintain a delivery network built for twenty billion letters, when we now only deliver seven billion letters.”
He made the announcement as IDS declared its strongest operating Christmas in four years, following a “significant improvement” in the final quarter of 2023.
Royal Mail delivered 387 million parcels in the three months ending December, 21 percent more than last year, while GLS, the international company, delivered 6 percent more: 245 million.
Sales rose 9.8 percent to £3.59 billion thanks to the lack of industrial action, which saw letters and parcels pile up at sorting offices across the UK during the previous festive period.
IDS admitted that revenue growth in the first nine months of the current fiscal year was offset by higher costs.
Still, the FTSE 250 company expects to post an operating profit in the second half of the year that will ‘more than offset’ the adjusted operating loss of £319 million in the first half and annual guidance remains at ‘approximately break-even’ levels lie.
Matt Britzman, equities analyst at Hargreaves Lansdown, commented: ‘Royal Mail needs to boost sales growth if the company is to return to profit, and a big part of that needs to come from winning back customers lost when industrial action wreaked havoc. The first signals are positive, but there is still a long way to go.’
International Distributions Services shares were 0.5 percent higher at 247.2p on Thursday morning.