Royal Mail fined £5.6m for missing delivery targets

Ofcom has fined Royal Mail £5.6m for failing to meet its First and Second Class delivery targets in the 2022/23 financial year.

Under Ofcom’s rules, each year Royal Mail is required to deliver 93% of First Class mail within one working day and 98.5% of Second Class mail within three working days, and complete 99.9% of delivery routes for each day on which a delivery is required.

In 2022/23, Royal Mail’s reported performance results showed that it had only delivered 73.7% of First Class mail on time and 90.7% of Second Class mail on time, and completed 89.35% of delivery routes for each day on which a delivery was required.

Ofcom can consider evidence submitted by Royal Mail of any exceptional circumstances that may have explained why it missed its targets. Even after adjusting Royal Mail’s performance for the impact of industrial action, extreme weather and the Stansted runway closure, its First and Second Class performance was still only 82% and 95.5% respectively.

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.

The communications regulator has imposed a fine of £5,600,000 on Royal Mail. The penalty includes a 30% reduction from the penalty which would otherwise have imposed, which reflects Royal Mail’s admissions of liability and its agreement to settle the case. The financial penalty is payable to HM Treasury within two months.

A spokes person for Ofcom tells us:

“Royal Mail’s role in our lives carries huge responsibility and we know from our research that customers value reliability and consistency.

“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.”

Ian Strawhorne, Ofcom Director of Enforcement:

Prioritisation and issues in the operation of delivery offices
As part of our investigation, we considered concerns about how parcels and letters might be prioritised for delivery.

In the evidence we assessed, we did not identify any suggestion that Royal Mail’s senior management had directed the prioritisation of parcels over letters outside of recognised contingency plans, such as during the pandemic and during the industrial action in 2022/23.

However, we are concerned that Royal Mail appears to have insufficient control, visibility and oversight over local decision-making at certain delivery offices where high absence and vacancies may have led to customer operations managers – who are responsible for individual delivery offices – making “on the day” decisions about what to deliver.

Given ongoing high absence and vacancies, and delays in bringing service levels back up, we are concerned about the operation of delivery offices, which we view as fundamental to Royal Mail meeting its delivery targets.

Royal Mail must ensure its customer operations managers are provided with appropriate training, so they are equipped to make such decisions. 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.