Royal Mail has announced that from 1 January, prices for first-class and second-class stamps will increase, to help "ensure the sustainability" of the service. The cost of a first-class stamp will increase by 9p, bringing the price to 85p. Similarly, the price of a second-class stamp will rise by 1p to 66p.
The national mail service announced that the year 2020 has been particularly challenging because of COVID-19. Although revenue grew nearly 10% in the first half of the year, it was not enough to offset a drop in profitability due to the amount spent on ensuring service continuity during the pandemic.
Royal Mail disclosed it had spent around £85 million on COVID-related expenses this year, including protective gear for its staff, overtime payments, and paying agency staff.
Also, letter volumes have fallen by 28% in the six months to September compared to the previous year. Royal Mail said that the reduction in letter volumes had had a significant impact on their finances. Their data indicate that the service lost as much as £180 million in the first half of the year.
On a more positive note, Royal Mail announced revenue from parcel deliveries has, for the first time in the service's history, overtaken letters, fuelled by the surge in online shopping during the pandemic. The postal group revealed that parcel delivery now accounts for around 60% of its revenue.
In fact, on its busiest day, Royal Mail processed a whopping 2.5 million tracked parcels. At the same time, its international business also observed increased volumes, in particular as China emerged from Covid-19 restrictions and economic activity increased early in the period. Overall, however, growth in the international parcel volume weakened over the year, due to reduced global air capacity.
Defending the price rise, a spokesman from Royal Mail said, “This demonstrates the need for change in the universal service. We are working tirelessly to deliver the most comprehensive service we can in difficult circumstances as the coronavirus pandemic continues to impact our operation.”
A recent report by regulator Ofcom suggested the service could save as much as £225 million a year by cutting Saturday letter deliveries, a move that would still allow them to fulfil the needs of 97% of individuals and businesses. However, any changes to the Royal Mail’s service level agreement would need parliamentary approval, so it is unlikely to happen in the near future.
Looking ahead, Royal Mail said it would be difficult to accurately forecast the second half of the year given the uncertainty around the pandemic. However, it is preparing for the busy Christmas period by recruiting a record 33,000 temporary workers to help manage the increased demand.