UPU USO Project Group
12 April 2010
Funding & Sustaining the USO: the UK Experience
Growth in letters, compared with
economic growth, 1984-2009
• Economic growth is no longer a guarantor of increasing
mail volumes: the two have de-coupled.
Indicative stages of the life cycle for
different mail applications
• Mail as a mode of communication is now in a mature
phase: volumes are in decline.
Operating profit margins of Western European
postal companies, 2007 (%)
• Operating profits are in decline for European PPOs:
including Royal Mail !
External revenues of Royal Mail Group,
2007-2008 - By division
• The mails business nevertheless still accounts for the
largest component of its revenues.
Segmentation of the letters market (volume)
by sender and recipient
• And in the mails business, B – C and B – B account for
most of the volume. If businesses use less mail, the
market will be severely impacted.
Value of the UK postal market, 2006-7
(£11.4 billion) by postal type and application
• Social mail makes only a small contribution to overall
volumes: but is expensive to collect via letter boxes.
Costs v Aspirations
• Postcomm surveys show that people value
postal services…...but are using them less.
• A universal service remains an important mode of
communication, and helps social cohesion.
• It also facilitates the fulfillment of internet
• Electronic communications !........e-mail, SMS,
mobile phones etc.
• Post is faced with the challenge of differentiating
itself from – as well as integrating with – other
modes of communication.
The Hooper Report
• Was commissioned in 2008 by the UK
Government to examine impact of FMO on Royal
• Hooper concluded that “the universal service
cannot be sustained under present policies.”
• He went on to say that “ a radical reform of Royal
Mail’s network is inevitable”.
Hooper’s Key Message
• “Sustaining the universal service depends
• MODERNISING ROYAL MAIL”
• He didn’t talk about compensation funds or state
The Post Offices
• Royal Mail’s mail business is kept separate from
its network of Post Office counters.
• Given its “wider social role”, he recommended
that the Post Office should remain wholly under
• This is because Post Offices are not expected to
operate on a commercial basis.
The Main Recommendations
• Royal Mail needs a ‘strategic partner’.
• Government should take responsibility for its
• Responsibility for postal regulation should be
vested in a ‘communications’ regulator (OFCOM).
• We agreed !!
• No strategic partner was found….
• The banking crisis further reduced mail
• The Postal Services Bill was not put before (this)
So Where Are We Now ??
• Still looking to implement Hooper’s key
recommendations (when the economic and
political climate is right).
• Supporting Royal Mail’s programme of
modernisation and cost reduction.
• But we are not seeking to ‘de-scope’ the USO
per se–in terms e.g.of 6 daily deliveries per week.
• Questions welcome……
• With any hard ones for Royal Mail colleagues…