Ofcom has today fined Royal Mail £10,500,000 for failing to meet its First and Second Class delivery targets in the 2023/24 financial year.
This is the second time we have found the company in breach of its regulatory obligations in recent years, after we fined it £5.6m in November 2023 for its performance in 2022/23.
Ofcom’s rules require Royal Mail to deliver, in each financial year, 93% of First Class mail within one working day of collection and 98.5% of Second Class mail within three working days of collection.
If Royal Mail misses its annual targets, Ofcom can consider evidence of any exceptional circumstances beyond the company’s control – such as the Covid-19 pandemic – and whether it would have achieved its targets had those events not occurred.
From April 2023 to March 2024, Royal Mail only delivered 74.7% of First Class mail on time and 92.7% of Second Class mail on time. The company blamed its poor performance on its challenging financial position, and delays to the ballot on a deal that followed the previous year’s industrial action.
Ofcom says it does not consider either of these to be justifiable reasons for Royal Mail’s failure to provide the levels of service expected of it. Ultimately, it is for the company to manage its financial position taking account of its obligations.
“We have therefore decided that the company breached its obligations by failing to provide an acceptable level of service without justification. Royal Mail took insufficient and ineffective steps to try and prevent this failure, which is likely to have impacted millions of customers who did not get the service they paid for.
“As well as fining the company, we have been pressing Royal Mail regularly on what it is doing to turn things around. While there has been some progress, its overall performance in 2023/24 was only marginally better than its reported performance in 2022/23, and it needs to do much better.
At a minimum we expect to see a clear, credible and publicly-communicated plan setting out how Royal Mail will get back on track through meaningful, sustainable and continuous improvements for customers.
Having failed to hit its targets in 2022/23, Royal Mail did not set out a clear improvement plan for 2023/24. Following engagement with Ofcom, the company published an update on its improvement plans in May this year, and we will be holding it to account for delivering a better service.
“When deciding how much to fine a company, we are required to consider what is appropriate and proportionate.
In deciding on the level of this fine, we have considered the harm suffered by customers as a result of Royal Mail’s poor service. Ofcom also has a duty to ensure the universal postal service is financially sustainable, so we have also taken account of the fact that Royal Mail has been losing hundreds of millions of pounds.”
The financial penalty of £10,500,000 will be passed in full to HM Treasury. The fine includes a 30% reduction from the £15,000,000 we would otherwise have imposed, reflecting Royal Mail’s admissions of liability and agreement to settle the case.
Ian Strawhorne, Ofcom Director of Enforcement, said: “With millions of letters arriving late, far too many people aren’t getting what they pay for when they buy a stamp. Royal Mail’s poor service is now eroding public trust in one of the UK’s oldest institutions.
“This is the second time we’ve fined the company since the pandemic. Royal Mail has provided an improvement plan, and we’re seeing some signs of progress, but it must go further and faster to deliver the service that people expect.”
Commenting on the news, Tom MacInnes, Director of Policy at Citizens Advice said: “Failing to hit a single delivery target for nearly five years is simply unacceptable by Royal Mail and it’s consumers left facing the consequences.
“Letter delays leave millions of people missing urgent medical appointment letters, legal documents and benefit decisions. This comes despite Royal Mail routinely hiking their prices, meaning consumers are getting less despite paying far more.
“Today’s fine from Ofcom goes some way to show it recognises Royal Mail’s persistent failings. But in a virtual monopoly, fines at this level clearly aren’t pushing Royal Mail to improve standards for all of us relying on our country’s postal service.”
