Recommendation 8

HM Government Accepted

Further to your letter of 16 March 2023 setting out the findings of the then Business, Energy and Industrial Strategy Committee’s report on Royal Mail and our response of 23 March 2023, I am writing to let you know that we have now opened an investigation into Royal Mail’s compliance with its quality of service performance targets during 2022/23. Royal Mail is required by our regulations to achieve certain performance targets in the delivery of universal service products. The objective of these performance targets is to ensure that consumers receive an adequate level of service. Ofcom therefore takes compliance with these targets very seriously. On 15 May 2023, Royal Mail announced that it did not meet a number of these targets in the 2022/23 period. In particular, Royal Mail announced that it: • delivered 73.7% of First Class mail within one working day of collection, as compared to a target of 93%; • delivered 90.7% of Second Class mail within three working days of collection, as compared to a target of 98.5%; and • completed 89.35% of delivery routes for each day on which a delivery was required, compared to a target of 99.9%. Performance against these targets is measured as an average performance level on an annual basis excluding the Christmas period. In light of Royal Mail’s reported performance, we have opened an investigation. In line with previous investigations,1 this will examine: i) whether Royal Mail was in breach of its obligations under the Designated Universal Service Provider (DUSP) condition 1.9.1 for the 2022/23 regulatory period, taking into account whether Royal Mail should be granted any allowance for specific events we consider to be exceptional and which affected its performance; and ii) if it was in breach, whether it may be appropriate to impose a financial penalty on Royal Mail for that failure, and the level of any penalty. The announcement of the opening of this case can be found on our Enforcement Bulletin. We have noted the concerns raised in your letter and report about whether Royal Mail was offering to provide a six-day delivery service (for letters), as required by the Postal Services Act 2011. We intend to address this issue through our QoS investigation which 1 See for example Ofcom, 2020, Decision finding Royal Mail contravened its quality of service performance targets in 2018/19 and imposing a financial penalty 6 Royal Mail: Responses to the BEIS Committee’s Seventh Report of Session 2022–23 will allow us to consider whether customers who purchased universal service obligation (USO) services received the service they paid for and whether recipients had their items delivered on time (e.g. first class mail should, in most cases, provide next working day delivery, including Saturdays). In doing so, one of the factors we are likely to consider is how any prioritisation of parcels over letters may have affected customers of USO services. We have a range of statutory information gathering powers that we expect to use in the course of our investigation to ensure we formally gather all relevant evidence to help us make our decision. Our evidence gathering will focus on what steps Royal Mail took to meet its quality of service obligations during the relevant period. We expect to complete and publish the outcome of our investigation by the end of 2023. At the same time, we will report back to the Committee as you requested. In the meantime, we will keep the Committee informed of developments as appropriate.