- Ofcom fines Royal Mail £5.6 million
- Missed delivery targets to blame
- IDS loses its monopoly to deliver mail
The UK’s communications regulator Ofcom has punished Royal Mail owner International Distributions Services (IDS) with a £5.6 million fine for its failure to meet delivery targets over the year to March.
The sanction follows a probe initiated by the regulator in May and includes a 30% reduction reflecting Royal Mail’s co-operation and admission of liability.
IDS shares fell 2% to 236p leaving them up around 10% for the year compared with a 6% fall in the FTSE 100.
NO EXCUSES
Ian Strawhorn, director of enforcement at Ofcom said: ‘Clearly, the pandemic had a significant impact on Royal Mail's operations in previous years. But we warned the company it could no longer use that as an excuse, and it just hasn't got things back on track since.’
It has been a tough year for the five-century old company which has faced several obstacles including industrial action, a ransomware attack and extreme weather over the last year.
Even adjusting for the disruptions, Royal Mail only managed to deliver 82% of first-class mail and 95.5% of second-class mail on time which falls short of Ofcom’s requirements of 93% and 98.5%.
EXPERT VIEW
AJ Bell investment director Russ Mould commented: ‘Royal Mail has paid the price for not having an efficient service. A £5.6 million fine by Ofcom is the latest embarrassment for owner International Distributions Services, which has repeatedly come under fire from the public and politicians for providing a sub-par service.
‘Its errors are having a damaging impact on people’s lives, from delayed hospital letters leading to missed appointments to companies not being able to get their products to customers and then leading to lost business. Citizens Advice said nearly one in three people in the UK experienced letter delays in May, which is shocking.
‘Last week Royal Mail lost its 360-year monopoly on delivering parcels from Post Office branches as rivals Evri and DPD were added as alternative options for customers.
‘This is the latest in a string of setbacks for the business as competition intensifies and consumers and businesses vote with their feet, realising they don’t have to stick with Royal Mail.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor of the article (Ian Conway) owns shares in AJ Bell.
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