Royal Mail warns stamp prices will rise AGAIN due to £120million hit from the Budget

The owner of Royal Mail has warned that it will have to increase prices even further after a £120 million hit from the Budget.

The boss of the postal service told reporters this morning that he could not rule out hiking stamp prices even higher as it faced the enormous burden of extra costs.

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Royal Mail bosses have warned the price of stamps may be increased yet again[/caption]

Martin Seidenberg, chief executive of International Distribution Services (IDS), said: “We are looking at all measures including pricing, parcel cost efficiencies, investment plans, automation and our parcel network.

“I cannot rule out [increasing stamps prices] but we will be looking at not just consumer letters but also business mail and parcels as well.”

Last month Royal Mail already hiked the price of first class stamps by 30p to £1.65 while second class stamps have remained at 85p.

The boss said that the Budget had added an extra £120million of costs due to employers national insurance contributions making it much more expensive to hire its 130,000-strong permanent workforce.

He also blamed the Chancellor’s measures for stopping it from returning to profit.

IDS reported revenues had risen by £481million to £6.3billion but it still faces an operating loss of £26million, compared to a £243million loss last year, after the £120million Budget impairment charge.

Two years ago Royal Mail was severely disrupted by industrial strikes by its unions which cost the business £200million. 

Last year it put a 10 per cent salary increase in place and a one-off lump sum for posties. Mr Seidenberg said that the agreement was still in place and it would now be in “continuous dialogue” with the unions. 

The Royal Mail boss said the Budget changes “disproportionately impacts us compared to our peers” and made a further call to the government to reform its Universal Service Obligation, which includes delivering and collecting mail six days a week.

It wants to drop second class post to every other day. 

When asked if further stamp price rises would put Brits off posting cards and letters altogether Mr Seidenberg said he believed the Christmas card tradition would still continue because it was important.

He added: “But it’s important to know that there is a cost of going up and down every garden path, and as population increases and letter volumes go down there is a heavy cost.”

In September regulator Ofcom, which has been consulting on the future of the universal postal service since January, said it is now focusing efforts on changes to the second class service while keeping first class deliveries six days a week.

Under the plans being considered, second class deliveries would not be made on Saturdays and would only be on alternate weekdays, but delivery times would remain unchanged at up to three working days.

Ofcom said no decision had been made and it continues to review the changes, with aims to publish a consultation early next year and make a decision in the summer of next year.

Royal Mail has urged the Government and Ofcom to review its obligations, arguing that it is no longer workable or cost-effective, given the decline in addressed letter post.

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