Royal Mail to amend Access contract after £800m losses

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Royal Mail is looking to amend its Access service contract, saying it has lost £800 million in handling the end delivery of mail on behalf of Access customers since the service was introduced in 2001.

Access is where Royal Mail accepts mail at its mail centres that has been partially sorted by large customers and other postal operators, and delivers it to the recipients for an agreed price.

Customers include large delivery and postal businesses who are also its competitors in other areas of the market, as well a large businesses such as banks.

Postal services have been in structural decline since 2005 with letter volumes down from 20 billion in 2004/5 to 15 billion in 2011/12. However the terms of Access have remained substantially unchanged, even though Access now accounts for about half of all addressed letter volumes in the UK, at some 7.2 billion items.

The Access provision broke even and recorded £1 million cash inflow for the first time in recent years in 2011/12.

Royal Mail is seeking views from its Access customers on the terms of a new model standard Access contract.

One of the key proposals in the Royal Mail review is a volume commitment from Royal Mail’s Access customers who choose to post on a national basis to receive a uniform national price.

A commitment by Access players in advance to send a certain volume with a national profile reduces the risk to Royal Mail of an unexpected drop in mail volumes which leads to an increase in unit costs for Royal Mail.

Royal Mail proposes to reflect the value of such a commitment by offering lower prices to customers who agree to commit volumes under the national profile.

It is also seeking customer views on creating tailored contracts for packet delivery arrangements, removing them from the standard model Access contracts. In 2011/12, packets represented less than 0.5 per cent of total Access volumes.

Stephen Agar, managing director, consumer and network Access said: “Royal Mail is committed to providing Access players with entry points to its network and appropriate sorting and delivery services on fair and reasonable terms.

“We believe this must be done in a way that allows Royal Mail to sustain the Universal Service for the benefit of households and businesses across the UK and provide our customers with the service they require.

“By putting Royal Mail’s Access contracts on a commercial footing, we will help secure the future of the Universal Service and continue to ensure the UK postal regime is one of the most open and competitive in the EU.”

Customers have until 16th November to submit their views.

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