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(Alliance News) - Royal Mail is set to be allowed to ditch Saturday deliveries for second class letters under plans being put forward by Ofcom that will also see wider postal delivery targets cut in the UK.
The regulator said that after a consultation, it had provisionally concluded that reducing the second class letter service to alternate weekdays, while keeping first class deliveries six days a week, would continue to meet postal users' needs.
This would save Royal Mail between GBP250 million and GBP425 million a year, according to Ofcom.
The planned changes to the universal postal service come as International Distribution Services PLC, the parent of Royal Mail, is being sold to Czech billionaire Daniel Kretinsky for GBP3.6 billion, with the deal being cleared by the government at the end of last year.
Kretinsky has pledged to stick to the universal service obligation after the takeover.
Ofcom also outlined plans to cut Royal Mail's main delivery targets, for first class mail from 93% to 90% delivered the next day, and for second class mail from 98.5% to 95% delivered within three days.
This will bring them more in line with other international and European markets, it added.
But it also follows recent hefty fines against Royal Mail for poor performance, with the group hit with more than GBP16 million in penalties in the past 18 months for failing to meet targets.
Natalie Black, Ofcom's group director for networks and communications, said: "The world has changed – we're sending a third of the letters we were 20 years ago.
"We need to reform the postal service to protect its future and ensure it delivers for the whole of the UK.
"But we're safeguarding what matters most to people – first class mail six days a week at the same price throughout the UK, and a price cap on second class stamps."
Ofcom said its latest research revealed most people do not need letter delivery six days a week, with the number delivered each year having slumped from 20 billion two decades ago to around 6.6 billion now and set to drop further to 4 billion in the next few years.
Ofcom is to consult further on its proposals until April 10, with a final decision to be made in the summer.
Emma Gilthorpe, chief executive of Royal Mail, said: "As Ofcom's analysis shows, it is no longer financially sustainable to maintain a network built for 20 billion letters when we are now only delivering 6.7 billion.
"Reform is crucial to support a modern, sustainable, and reliable postal service for our customers, our company and our people."
The Communication Workers Union (CWU) warned the overhaul must come with better working conditions for Royal Mail staff and service improvements.
Dave Ward, general secretary of the CWU, said: "The trials that we have agreed with Royal Mail are strictly conditional on the basis that we see a significant improvement in service reliability for customers, as well as terms and conditions for postal workers being improved – including improved attendance patterns, more Saturdays off, agreed long-term job security and the creation of a genuine platform for growing the company.
"Any failure to abide by these conditions will see our support withdrawn."
"The prospective owners of Royal Mail, EP Group, have committed to restoring faith in the UK postal service – we will hold them to this," he added.
IDS shares were up 0.2% to 365.20 pence in London early Thursday.
By Holly Williams, PA Business Editor
source: PA
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