Royal Mail says weight-based pricing caused £212m loss

by Daniel Farey-Jones, Brand Republic 28-Jul-05, 07:00

LONDON – Royal Mail has released profit and loss figures to support its case for introducing size-based pricing, which it argues is necessary for it to compete on a 'level playing field' after the introduction of full competition to the postal market.

The state-owned firm says the figures, submitted to Postcomm, show it has been unable to make much progress in rebalancing postage prices to reflect its real costs.

It made a loss for the 2004-2005 financial year of £212m on items weighing 0-100g, which accounts for 83.5% of the 22bn items it handled. The equivalent figure for 2003-20044 was a loss of £158m. A Royal Mail spokeswoman said that the increase was partly due to higher wages and a bonus for implementing "single day" delivery, paid to delivery staff

Royal Mail made profits on heavier items in 2004-2005, amounting to £112m on items weighing 101-350g, and £527m on non-licensed, 350g and over items.

Postcomm is currently deciding whether to approve Royal Mail's request for size-based pricing after conducting a second round of consultation on the issue. Announcing the second round in April, it said it was "minded to accept" Royal Mail's proposals and that a notice period of 12 months would be "reasonable".

Royal Mail claims the changes would leave 70% of mail unaffected.

Adam Crozier, chief executive of Royal Mail, said: "We welcome competition -- but we need a fair and flexible pricing regime that allows us to compete for profitable business mail on a level playing field."

If you have an opinion on this or any other issue raised on Brand Republic, join the debate in the Forum.