Business

MPs fear postal market changes

Royal Mail post box Image copyright Getty Images
Image caption The Commons Business Committee says postal regulator Ofcom may need new powers

An influential committee of MPs has called on the postal regulator to show that it can react swiftly to changes in the postal market.

The Commons Business, Innovation and Skills Committee (BIS) said Ofcom had to perform a "balancing act" between encouraging competition and preserving the universal service obligation (USO).

This ensures that letters are delivered for the same price anywhere in the UK.

MPs said the regulator may need extra powers to protect the service.

While MPs said the USO was not under immediate threat, they warned that market conditions were changing rapidly.

Labour MP Adrian Bailey, who chairs the committee, said: "The fundamental principle of the universal service must be upheld. Ofcom need to move quickly to respond to any threat to the universal service and the Government should look to make changes to the regulatory framework to ensure Ofcom has the tools to do the job."

'Changing quickly'

The committee members called for accurate costings of the USO, along with a geographical breakdown of where it was profitable.

"Ofcom has a difficult role in ensuring the provision of a universal service is both financially sustainable and efficient," Mr Bailey said.

"The postal sector is changing quickly, with declining volumes of letters, and a sharp increase in parcel volume arising from the rapid growth of internet shopping."

Ofcom said it was pleased that the committee agreed with the regulator and did not think the universal postal service was under threat.

"If we identify a future threat, we have powers to step in quickly to protect the needs of UK postal users," a spokesman said.

Royal Mail said it shared MPs' concerns that Ofcom may not be able to respond quickly enough to avoid the USO failing.

Following the collapse of City Link over Christmas, Mr Bailey said it was important that greater competition in the postal sector did not worsen pay, terms and conditions for postal workers.

Media playback is unsupported on your device
Media captionAdministrators warned of "substantial redundancies" over the coming days.

Royal Mail endorsed the committee's recommendation that the government considers extending Ofcom's remit to include consideration of labour costs, conditions and standards in the postal sector.

The company listed on the London Stock Exchange in October 2013. After rising above 600p early last year, the share price has since fallen by about 25%.

On Wednesday, Royal Mail shares closed at 437.6p, up 3.6%.

More on this story