The cost of a 1^st class stamp will rise from 76p to 85p, a 9p rise, while the price of a second class stamp will go up by 1p to 66p, with the price hikes taking effect from 1 January 2021.

Royal Mail says the price hikes are necessary ‘to help ensure the sustainability of the one-price-goes-anywhere Universal Service’.

The Universal Service Obligation, which requires Royal Mail to be able to deliver to 31 million home and business addresses across the UK, comes with high fixed costs.

During the coronavirus pandemic, letter volumes saw a 28% fall. The reduction in letter volumes has had a significant impact on the finances of the Universal Service which lost £180m in the first half of the year.

Royal Mail says this demonstrates the need for change in the Universal Service and that it is ‘working tirelessly to deliver the most comprehensive service we can in difficult circumstances as the coronavirus pandemic continues to impact our operation’.

Royal Mail says it has faced significant, additional costs related to Covid-19 (£85m for the first six months) such as protective equipment, elevated absences, overtime and agency staff, as well as the impact of necessary social distancing measures.

Royal Mail hasn’t used the government’s furlough scheme throughout the pandemic.

It says its stamp prices are among the best value in Europe compared to other postal operators. Royal Mail research shows that the European average price for 1st class letters is £1.21.

Nick Landon, chief commercial officer at Royal Mail, said: “Like other companies, 2020 has been a challenging year for Royal Mail. Our people have worked tirelessly to keep the UK connected throughout the pandemic and associated restrictions. These price increases will help us continue to deliver and sustain the Universal Service in challenging circumstances.”