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MAGGIE PAGANO: Royal Mail has to adapt to compete

MAGGIE PAGANO: If Royal Mail is to compete with competing services, the government and unions must be given flexibility to adapt as the market changes

When Herbert Henry Asquith was Prime Minister of Great Britain, in the years leading up to World War I, he sent love letters to his mistress by mail up to three times a day.

The letters – all 560 and often written in cabinet – are said to contain vital secrets about military strategy, such as commanding submarines to the Baltic.

His billets doux would reach his lover within hours of being sent by regular mail. Until the end of the war, postal deliveries were on Sundays.

All change: The decline in letter writing, a long-term trend accelerated by the pandemic, is one of the reasons Royal Mail is heading for a loss this year

All change: The decline in letter writing, a long-term trend accelerated by the pandemic, is one of the reasons Royal Mail is heading for a loss this year

How times have changed. Today, Asquith is said to have tapped on his iPhone, using WhatsApp or Signal, to send his messages. Even if he wanted to write a letter, there is no guarantee that it would arrive the day after it was sent, let alone the same day.

That is progress. Email, text messages, WhatsApp and other social media tools have ruined our writing habits. In 2012-2013 we sent 17.4 billion addressed letters. In 2019-2020, the numbers had fallen almost 30% to 12.7 billion.

This decline in letter writing, a long-term trend accelerated by the pandemic, is one reason why Royal Mail is facing a loss this year, despite higher revenues. It is also why the chairman, Keith Williams, is paving the way for controversial postal reforms with his latest wake-up call that six days a week mail delivery is no longer ‘economic’.

His weekend warning was carefully planned and follows rumors over the past few weeks of a reduction in Saturday mail delivery.

This is explosive stuff, setting Williams on course for another showdown with the unions, annoying customers in remote parts of the UK and, of course, violating commitments promised to the government. Scrapping Saturday deliveries would mean breaking the universal service obligation, requiring the Royal Mail to deliver letters across the country Monday to Saturday at a ‘uniform price’ and parcels five days a week. But if anyone can manage such a high-strung act between three groups of interested parties, it’s Williams, the former British Airways boss. He is a powerhouse who is well-oiled in tough negotiations with unions.

His intervention has been carefully timed: the watchdog Ofcom will be reporting the results of its regulatory review of Royal Mail’s services in the coming weeks.

Packages include the elephant in the room and possibly the savior of the Royal Mail. Over the past seven years, the number of parcels delivered by your postman has increased 20 percent this year to 1.3 billion. Royal Mail has been delivering parcels six days a week and has just founded Parcel Collect, a new service that charges customers 72 pence to collect parcels from your home.

That sounds like a great deal, as it saves people the trouble of going to the post office – where the counters are among the worst and slowest on the high street – and it provides convenience for the elderly.

As customers shop more online, another trend accelerated by lockdown restrictions, the demand for deliveries can only grow. Half of all Christmas shopping this year will go through our screens.

If Royal Mail is to compete with DPD and Hermes, and other rival services, Williams must be given the flexibility of the government and unions to adapt as the market changes. With luck, he can convince the unions that there will be more jobs in the future than fewer. Indeed, an additional 13,000 temporary workers will be hired to help with the Christmas rush, while many hundreds of jobs will be created with the new parcel service. Maybe this could be Royal Mail’s Clause 4 moment?

Hut at a height

The booming sales at Hut Group rather prove the point that online shopping defies gravity and stands in a world on its own.

Hut boss and founder Matthew Molding has revised his sales advice to around £ 1.5 billion for the year. In its first update as a publicly traded company, Hut – which operates websites most of us have never heard of, such as Glossybox, Perricone and My Protein – also reports a 38 percent increase in sales for its beauty and lifestyle products.

Hut’s stellar growth is astonishing. Despite questionable corporate governance references, Hut was listed on the London Stock Exchange for about £ 5.4 billion just a few weeks ago. It is now worth £ 6.7 billion. If Hut’s valuation reaches £ 7.25 billion, Molding will receive £ 700 million in shares, bringing his stake to 25.1 percent. For what it’s worth, his fortune was up another £ 22 million yesterday thanks to the sales update. For those who hold stocks, time to turn a profit. When something seems too good to be true, it usually is.