The figures are in and they are not pretty. Royal Mail, the privatised postal service that still clings to a universal service obligation, has managed to deliver only three-quarters of first-class mail on time. For a business that charges a premium for ‘first-class’ service, this is a failure of basic contractual obligation. Yet, before we reach for the pitchforks, we must ask: is this a failure of management, or a symptom of a market that has moved on?
Let us examine the numbers. Royal Mail’s target, set by the regulator Ofcom, is 93 per cent of first-class mail delivered within one working day. The actual figure is 73.5 per cent. That is a gap of nearly 20 percentage points. If any FTSE 100 company missed its earnings by that margin, the CEO would be summoned before a parliamentary select committee. Instead, we get a limp apology and a promise to recruit more posties.
But here is the uncomfortable truth. The postal market is in structural decline. First-class mail volumes have fallen by over 60 per cent since 2000. The rise of digital communication, from emails to WhatsApp, has rendered the stamped letter an antique. Even second-class mail, which still meets its target, is a shadow of its former self. Royal Mail is not a growth stock; it is a value trap dressed up in a red postbox.
So why should we care? Because the universal service obligation is a government mandate, a legacy of a time when the letter was the backbone of British commerce. Today, it is a subsidy for inertia. The regulator Ofcom must decide whether to enforce the target, which would force Royal Mail to spend money it does not have, or relax it, which would signal the end of a cultural icon.
Investors, of course, have already voted with their feet. The share price has halved since its 2021 peak. Pension funds have been dumping the stock. The bond market is pricing in a significant risk premium. This is not a company in crisis; it is a company in managed decline.
The real scandal is not the missed target. It is that we pretend the target still matters. If the government wants to guarantee next-day delivery for every letter, it should nationalise the service. If it wants a private sector provider, it must accept that the market will allocate resources where they are most profitable. You cannot have it both ways.
Until that decision is made, we will continue to get these quarterly reports of failure. And the only thing that will be delivered on time is the excuses.
