Royal Mail given freedom to charge 5p more for stamps

Royal Mail given freedom to charge 5p more for stamps

The postal regulator has announced plans to give the Royal Mail greater commercial freedom to help it tackle growing competition and signalled support for higher prices which could see first class stamps increase by 5p.

Postcomm said Royal Mail will have the flexibility to increase prices on stamped mail by up to 10 per cent in light of its decision to roll forward the price control to 2011-12.

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If Royal Mail applied this maximum price increase, this would equate to a 5p increase in the cost of a first class stamp to 46p, and a 4p increase on a second class stamp to 36p.

Postcomm said it intended to bring in "substantial deregulation" of packets and parcels weighing more than two kilograms as well as remove retail price controls from all packets and parcels weighing more than 500 grams, and in parts of the pre-sorted bulk mail market.

The Royal Mail will also be given greater freedom to compete in the pre-sorted bulk mail market, where the company has lost business to competitors.

Postcomm chairman Nigel Stapleton said: "This package forms the bedrock of a much needed new, lighter-touch regulatory framework.

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"We welcome the development of competition in parts of the postal market and where this is clear we want to ensure that Royal Mail is free to compete on a level playing field with its competitors."

The regulator said Royal Mail should have the flexibility to increase the prices it charges customers from April 2011 on average by 7 per cent, which would mean it could realise up to 280m in additional revenues.

Together with the decision to roll forward price controls for 2011-12, this could mean price increases of up to 12 per cent across all regulated products.

Mr Stapleton said: "There is broad consensus that there is a risk to the universal service unless Royal Mail quickly becomes a lot more efficient."

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The Communication Workers Union warned that higher prices were a sign of things to come under privatisation and argued that the universal service would not be at risk if regulation had been better managed.

Consumer Focus said customers will be "extremely disappointed" at the prospect of higher stamp prices next year.