Can Royal Mail deliver Christmas?

Politicians, postal workers and the industry regulator have warned that Royal Mail is struggling to send post on time across the country, raising questions about the company’s preparedness to deliver Christmas for the UK.

After a disastrous festive period last year, when postal workers went on strike for weeks, Royal Mail is racing to ensure Britons’ Christmas presents arrive punctually this month.

But despite an internal “We are Christmas” campaign to energise staff, and the hiring of temporary workers, Royal Mail is facing criticism for high vacancies and substandard service levels, prompting concerns about its resilience in the face of growing competition from the likes of Amazon.

“There seems to be a service failing,” said Tracey Crouch, MP for Chatham and Aylesford in Kent, one of several politicians who said they had received large numbers of complaints from constituents about late deliveries this year.

Crouch said the number of complaints had been particularly high over the past month and she had arranged a meeting with Royal Mail to understand why hospital letters and other important mail were arriving late.

One postal worker in north London said delivery offices were failing to post all their mail on Monday to Friday. “A lot of people are leaving, which means jobs are covered [by other staff]. The workload is ridiculous,” said the worker, who did not want her name to be published.

The criticism was echoed by the industry regulator, Ofcom, which last month slapped Royal Mail with a £5.6mn fine for failing to meet its targets during the year to March.

In its annual performance report earlier this month, Ofcom said it was “concerned that Royal Mail’s performance has not shown any signs of improvement in recent months and [was] disappointed that it has been unable to provide us with a timeline for when its performance will improve”.

It said in the second quarter the company had only delivered 74 per cent of first class mail on time, noting “high levels of staff absence and vacancies”.

Ofcom’s director of enforcement Ian Strawhorne said that although “the pandemic had a significant impact on Royal Mail’s operations . . . it just hasn’t got things back on track since”.

Martin Seidenberg, chief executive of Royal Mail’s parent company International Distributions Services, has said the postal group was “pulling out all the stops to deliver Christmas”, including recruiting 16,000 seasonal workers, opening five temporary mail-sorting centres and offering employee bonuses of up to £500 for delivering post on time.

Royal Mail acknowledged there were “quality challenges” linked to employee absences, but said it was recruiting hundreds of full-time staff weekly. 

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The management has also warned that the former state-owned company’s historic and legally binding obligations, which do not apply to its competitors, were holding back growth.

Royal Mail is particularly worried that the requirement to offer letter deliveries six days a week, despite a huge drop in volumes following the rise of email, is putting a strain on efficiency and profitability. Ofcom is reviewing the rule and Royal Mail said it was speaking to “every political party” in the lead up to next year’s general election, after calling for an end to Saturday letter deliveries.

But with a change to the laws not forthcoming, Royal Mail is under pressure to win back market share.

In the lead-up to last Christmas, when Royal Mail staff walked out for 18 days, many retailers sent their packages through rival couriers, which tend to keep costs down by hiring delivery workers on lower-paying and more flexible contracts.

The industrial action, which centred on Royal Mail’s plans to adapt working practices and keep up with the competition, was shortly followed by a cyber attack that all but shut down its international delivery service and frustrated customers further. Royal Mail’s parcel market share dropped from 34 per cent to 25 per cent in between 2020 and 2022, according to analysis group Pitney Bowes.

“One thing [Royal Mail has] got to do is win back market share and the big question is: can they?” said Alex Irving, a logistics industry analyst at Bernstein.

“I wonder how many customers who allocated volumes to another [delivery business] found, actually, it was OK.” 

The amount of deliveries that rivals snatched from Royal Mail during the strikes was unprecedented, according to an executive at one of the company’s largest competitors.

“It’s an interesting challenge [that Royal Mail] has got to face. But for me, being selfish, we are loving it.”

The group’s finances are also under pressure, with Royal Mail not expecting to turn a profit until at least the financial year ending in March 2025. Its operating loss increased 46 per cent year on year during the six months to September, to £319mn. This was attributed in part to a higher pay deal for workers, which was agreed in exchange for the union accepting changes to delivery start times and Sunday working.

Potentially adding to the company’s financial woes, mail group Whistl announced in November that it was bringing a £600mn legal case against Royal Mail. Ofcom found in 2018 that Royal Mail had engaged in price discrimination that prevented Whistl from launching a rival delivery service, although the group has dismissed Whistl’s case as “without merit”.

Royal Mail’s chief commercial officer Nick Landon acknowledged that “a lot of our customers” took their business to rival couriers. But he said the group was pushing to recover parcel volumes and was expecting to “win more [business] than we lost”.

He pointed to accelerating efforts to modernise the mail network after Royal Mail settled its dispute with the union. This year, Royal Mail opened a 53-acre “Midlands super hub” that it said could automatically sort 90,000 packages hourly and launched a drone delivery service in Orkney. 

However, it is seeking to scale up its parcel business just as the economic downturn hits demand for online shopping. A successor to Simon Thompson, who stepped down as chief executive in May, is yet to be appointed, with Seidenberg overseeing the company in the interim.

“We have got a more intense competitive landscape, but we don’t know what the [Royal Mail] strategy is,” said Irving at Bernstein. “They have the tools to turn it around. But it is still a big and tough job.”

Just “doing well at Christmas” is a “very near-term” target for the UK’s postal service, he added.