Royal Mail fined £5.6m for ‘significant’ delivery target failures

Royal Mail has been fined £5.6 million by regulator Ofcom for a “significant” failure to meet its postal delivery targets in the past financial year.

Ofcom imposed the penalty following an investigation launched in May after Royal Mail fell short of its performance targets across the 2022 to 2023 financial year for first and second class mail deliveries.

Some 73.7% of first class mail was delivered within one working day across the year, against a target of 93%, while 90.7% of second class mail was delivered within three working days, compared with the target of 98.5%.

And 89.35% of delivery routes were completed on the required day, well behind the 99.9% target.

The postal watchdog said that, even after taking into account strike action disruption, extreme weather and the closure of the runway at Stansted Airport, Royal Mail’s first and second class performance was still only 82% and 95.5% respectively.

Ofcom said: “This means that Royal Mail breached its obligations by failing to meet its targets by a significant and unexplained margin.

“This caused considerable harm to customers, and Royal Mail took insufficient steps to try and prevent this failure.”

Fine

Ofcom said Royal Mail’s fine was cut by 30% after the company admitted the failures and agreed to settle the case.

The fine will be paid to the Treasury within two months.

Last year, an investigation into its missed targets was closed after the regulator ruled that greater staff absences and social distancing regulations resulting from Covid had affected the service.

It also decided not to open an investigation into Royal Mail’s service levels during the 2020-21 financial year because of the “uniquely difficult circumstances” of the pandemic.

Ofcom director of enforcement Ian Strawhorne 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.

“The company’s let consumers down, and today’s fine should act as a wake-up call – it must take its responsibilities more seriously.

“We’ll continue to hold Royal Mail to account to make sure it improves service levels.”

The regulator said its probe did not uncover any evidence that Royal Mail bosses had ordered delivery officers to prioritise parcels over letters outside pandemic or strike action contingency planning.

But it did raise concerns over the running of Royal Mail’s delivery offices, which it said is “fundamental” to Royal Mail meeting its delivery targets.

Ofcom said Royal Mail “appears to have insufficient control, visibility and oversight over local decision-making at certain delivery offices”, with customer operations managers making “on-the-day” decisions about what to deliver in the face of staff shortages due to high absences and vacancies.

Royal Mail must give customer operations managers appropriate training to be able to make these decisions, it said.

“We will be keeping a close eye on the company’s performance this year, and the steps it is taking to return delivery offices to pre-Covid practices,” Ofcom added.

Royal Mail admitted it was “very disappointed” with its delivery performance in 2022-23, but said it was a “uniquely challenging” year, with the group grappling with 18 days of strike action.

A spokesman for the company, which is owned by FTSE 250-listed International Distributions Services, said: “We take our commitment to delivering a high level of service seriously and are taking action to introduce measures to restore quality of service to the level our customers expect.”

The fine comes after it was revealed at the weekend that Royal Mail is facing a legal claim for £600 million in damages from rival Whistl over allegations of anti-competitive behaviour.

Royal Mail has already been hit with a record £50 million regulatory fine over the affair.

Royal Mail said in its recent annual report that it believes the claim is “without merit” and that it will “defend it robustly”.