Ofcom has fined Royal Mail £5.6m for failing to meet its First and Second Class delivery targets in the 2022/23 financial year.
Under Ofcom’s rules, each year Royal Mail is required to deliver 93% of First Class mail within one working day and 98.5% of Second Class mail within three working days, and complete 99.9% of delivery routes for each day on which a delivery is required.[1]
In 2022/23, Royal Mail’s reported performance results showed that it had only delivered 73.7% of First Class mail on time and 90.7% of Second Class mail on time, and completed 89.35% of delivery routes for each day on which a delivery was required.
Ofcom can consider evidence submitted by Royal Mail of any exceptional circumstances that may have explained why it missed its targets. Even after adjusting Royal Mail’s performance for the impact of industrial action, extreme weather and the Stansted runway closure, its First and Second Class performance was still only 82% and 95.5% respectively.[2]
This means that Royal Mail breached its obligations by failing to meet its targets by a significant and unexplained margin. This caused considerable harm to customers, and Royal Mail took insufficient steps to try and prevent this failure.
So we have decided to impose a fine of £5,600,000 on Royal Mail. The penalty includes a 30% reduction from the penalty we would otherwise have imposed, which reflects Royal Mail’s admissions of liability and its agreement to settle the case. The financial penalty is payable to HM Treasury within two months.
Ian Strawhorne, Ofcom Director of Enforcement, said: “Royal Mail’s role in our lives carries huge responsibility and we know from our research that customers value reliability and consistency.
“Clearly, the pandemic had a significant impact on Royal Mail’s operations in previous years. 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.
“The company’s let consumers down, and today’s fine should act as a wake-up call – it must take its responsibilities more seriously. We’ll continue to hold Royal Mail to account to make sure it improves service levels.”
Prioritisation and issues in the operation of delivery offices
As part of our investigation, we considered concerns about how parcels and letters might be prioritised for delivery.
In the evidence we assessed, we did not identify any suggestion that Royal Mail’s senior management had directed the prioritisation of parcels over letters outside of recognised contingency plans, such as during the pandemic and during the industrial action in 2022/23.
However, we are concerned that Royal Mail appears to have insufficient control, visibility and oversight over local decision-making at certain delivery offices where high absence and vacancies may have led to customer operations managers – who are responsible for individual delivery offices – making “on the day” decisions about what to deliver.
Given ongoing high absence and vacancies, and delays in bringing service levels back up, we are concerned about the operation of delivery offices, which we view as fundamental to Royal Mail meeting its delivery targets.
Royal Mail must ensure its customer operations managers are provided with appropriate training, so they are equipped to make such decisions. We will be keeping a close eye on the company’s performance this year, and the steps it is taking to return delivery offices to pre-Covid practices.
A non-confidential version of our decision will be published in due course.
Liam Byrne MP, Chair of the Business and Trade Committee, has called for Royal Mail to deliver changes to its operations on time, following news of the firm’s fine for missing post targets.
He said: “The Business & Trade Committee welcomes the robust action taken by Ofcom. In our report on Royal Mail, published earlier this year, we said that the company had systematically failed to deliver its statutory Universal Service Obligation, and called on Ofcom to investigate this issue.
“The Universal Service Obligation is not an aspirational target – it is a matter of pride for posties across the land, a crucial connection for people in isolated communities, and the cornerstone of Royal Mail’s contract with the public. Everyone in the UK must have access to a consistent postal service, no matter where they live.
“Royal Mail must make it clear how they will fix this issue and secure the future of the USO. Unlike its apparent approach to the public’s post, it is critical that Royal Mail’s future is delivered on time.”
Royal Mail responded: “We are very disappointed with our Quality of Service performance in 2022-23 and acknowledge Ofcom’s decision today.
“Last year was uniquely challenging for Royal Mail. 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 and has adjusted the figures to 82% for First Class and 95.5% for Second Class mail.
“Quality of Service is extremely important to us. We take our commitment to delivering a high level of service seriously and are taking action to introduce measures to restore quality of service to the level our customers expect.”