Meanwhile, the price of first class stamp on a large letter is to increase by 35p from £1.60 to £1.95 – an rise of 22%. However, Royal Mail noted that the cost of a second class stamp will remain unchanged at 75p.

It is the second time stamp prices have been increased this year. In April, the cost of a first class stamp increased by 15p to £1.10, the first time it has passed the £1 threshold. Meanwhile, the cost of a second class stamp rose 7p to 75p.

Alongside a challenging economic environment, the Royal Mail blamed the lack of reform of the Universal Service Obligation (USO) for the price hike, despite the significant structural decline in letter volumes.

The USO sets out that Royal Mail must provide a six-day-a-week, one-price-goes-anywhere postal service to the 32 million UK addresses.

Equal to European neighbours

The Royal Mail said that despite the rise in price, the new fee for a first-class stamp is in line with the median cost across other European countries. It also said that the price of a second class stamp remains well below average European prices.

The number of letters sent has declined for years letters in the digital age, according to the Royal Mail. Overall, the number of letters sent has fallen from 20 billion a year in 2004/5 to seven billion a year in 2022/3.

At the same time, the amount of addresses has risen by four million over the same period.

USO in need of reform

The Royal Mail has said that the USO is badly in need of reform. The postal service claims that the cost of delivering an ever-decreasing volume of letters to a growing number of households is now unsustainable.

Ofcom, the regulator for the postal services, conducted its own research which revealed that a five day a week letter service between Monday to Friday would meet the needs of 97% of consumers and SMEs. The Royal Mail is calling on Ofcom and the Government to review the USO to reflect the changing needs of its customer base.

In May, the full-year financial results highlighted the current problem with Royal Mail reporting a £419 million loss.

Nick Landon, the chief commercial officer at Royal Mail said: “We understand the economic challenges that many of our customers are currently facing and have considered the price changes very carefully in light of the significant decline in letter volumes.

“Letter volumes have reduced dramatically over recent years, down more than 60% from their peak in 2004/5 and 30% since the pandemic. It is vital that the Universal Service adapts to reflect this new reality.”

How to save on stamps

Those who send a lot of mail or who are looking to cut costs on sending letters should purchase stamps before 1 October as these will still be usable after the price hikes. Alternatively, if letters are not urgent, then it may be wise to stick with second-class deliveries.