Royal Mail Could Save up to £650 Million with a Three-Day Service

The U.K. communications regulator, Ofcom, has warned that the Royal Mail may need to undergo significant changes in order to remain sustainable. It suggests that by moving to a three-day service, the postal service could save up to £650 million ($824.7 million).

Ofcom highlighted that although Royal Mail's obligations have remained the same since 2011, there has been a decline in letter volumes by half while parcel deliveries have increased in importance. As a result, costs have risen significantly.

To achieve these cost savings, Ofcom proposes that Royal Mail should modify its existing first and second class and business products. It suggests that most letters could be delivered within three days or longer, while still offering a next-day service for urgent letters.

Additionally, Ofcom suggests reducing the number of letter-delivery days from six to either five or three, pending approval from U.K. lawmakers.

According to Ofcom, by reducing letter deliveries to five days, Royal Mail could save between £100 million and £200 million, and reducing it further to three days could result in cost savings of between £400 million and £650 million.

Ofcom emphasizes that it doesn't intend to lower the current delivery targets. However, it does express concern over Royal Mail's recent poor performance and expects urgent improvements.

The regulator also indicates that most participants in its research are open to the reduction of some services and standards, mostly relating to letters, in order to maintain affordable prices and pay only for the services required.

Interested parties have until April 3 to submit their views on the matter.