UK communications regulator Ofcom today introduced a cap on the prices that Royal Mail cancharge for Second Class stamps for small parcels and large letters.
The move follows a decision in March to extend the “safeguard cap” for Second Class stamps forsmall parcels up to 2kg and large letters. Part of initiatives aimed at securing the universalpostal service, Ofcom said these measures were designed to protect small businesses and vulnerableconsumers.
It added: “Today’s decision, which follows a period of consultation on the structure and thelevel of the cap, provides consumers with the same level of protection from price rises on SecondClass stamps for large letters and small parcels up to 2kg, as they have on Second Class letters.This means that, over a seven-year period, average price increases on Royal Mail’s large lettersand small parcels products will be capped in line with the percentage price increases allowed underthe cap on Second Class letters. The cap itself will be indexed with CPI inflation.”
Ofcom said research indicated that the average UK household last year spent around 50p (€0.40)per week on postal services. “Of this, we have estimated that approximately half was spent on largeletter and packet and parcel products,” it added. “The safeguard cap is designed to ensure thatconsumer expenditure on these items remains affordable, while at the same time allowing Royal Mailflexibility in its pricing decisions, consistent with our overall approach of pricederegulation.”
Ofcom’s decision allows Royal Mail to increase prices across the ‘basket’ of Second Class stampsfor Large Letters and packets and parcels up to 2kg by no more than 53% over the current aseven-year period of the control (based on 2011/12 prices). This is consistent with the approachused for setting the level of the safeguard cap for Letters. Royal Mail increased the weightedaverage price of these services by 14% in 2012/13. A cap of 53% therefore allows a further 34%flexibility in pricing (in addition to CPI inflation) over the remainder of the seven-year period,Ofcom said.
Stuart McIntosh, Ofcom’s Group Director of Competition, said: “Ofcom’s decision to extend thesafeguard cap to large letters and small parcels will further protect small businesses andvulnerable consumers.”
