Drop Royal Mail’s universal service, says consultancy

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Royal Mail should be relieved of its universal service obligation, consultancy Transport Intelligence argues in a new report – European Mail 2010.

Instead, it argues that the government should contract mail delivery to a range of service providers who bid for regions on a “lowest-subsidy” basis.

The report says it is unrealistic to believe that Royal Mail has a sustainable future without some form of privatisation.

In exchange for the new investment which privatisation would bring, the workforce is likely to pay a high price in “efficiency savings”, it warns.

“Other postal services which have gone through this process, such as Deutsche Post, Sweden Post and New Zealand Post, have reduced headcount by between 40-50 per cent.”

Joel Ray, Ti’s head of consultancy, said: “Freeing the Royal Mail to access private capital is only part of the solution. It should also be unburdened of other political constraints such as the universal service obligation.”

It argues that the “lowest subsidy” model has been adopted successfully in Sweden.

“It also works well in the UK rail and bus markets to provide services to destinations which could not otherwise be covered. This would create a truly liberalised market which would benefit UK businesses and consumers.”

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