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Royal Mail seeks stamp of approval for price hike

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27/02/2007

Royal Mail has asked regulator Postcomm to approve a 6p rise in the price of a stamp to help stem its losses and to make a UK investment to ensure its survival.

At its current pricing levels, Royal Mail incurs a loss of 6p on every letter it delivers. Increased competition from private sector companies is also eating into its business volumes, and senior executives are concerned that the organisation is rapidly becoming unviable, unless it receives a massive UK investment.

If the price increases are agreed, the cost of a standard first-class letter will rise to 38p and a second-class stamp will cost 29p.

Royal Mail also wants to change the way franked business mail is dealt with, to maximise profit margins on the revenue it derives from this side of its business.

What is not clear at the moment is the timing of any price rises, as Royal Mail currently has an agreement with Postcomm that runs to 2010, and no more UK investment in the business was expected before that date.

Under the arrangement Royal Mail can still ask for price increases, but it would have implications for its universal service obligation (USO), which states that a first or second class stamp ensures a letter is delivered to all addresses in the UK.

 

 

 

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