Citizens Advice responds to Ofcom imposing a £10.5m fine on Royal Mail for failing to meet delivery targets

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Responding to Ofcom's announcement that Royal Mail is to be fined £10.5m for failing to meet its delivery targets in the 2023/24 financial year, Tom MacInnes, Director of Policy at Citizens Advice said: “Failing to hit a single delivery target for nearly five years is simply unacceptable by Royal Mail and it’s consumers left facing the consequences.

“Letter delays leave millions of people missing urgent medical appointment letters, legal documents and benefit decisions. This comes despite Royal Mail routinely hiking their prices, meaning consumers are getting less despite paying far more.

“Today’s fine from Ofcom goes some way to show it recognises Royal Mail’s persistent failings. But in a virtual monopoly, fines at this level clearly aren’t pushing Royal Mail to improve standards for all of us relying on our country’s postal service.”

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Investigation into Royal Mail’s quality of service performance in 2023/24

https://www.ofcom.org.uk/post/royal-mai ... 2010500000

After considering the evidence, Ofcom has today issued Royal Mail with a Decision finding that it contravened DUSP condition 1.9.1 by failing to meet the national first class and second class targets during 2023/24. We have also decided to impose a financial penalty on Royal Mail for this breach.

Ofcom has discretion to adjust Royal Mail’s measure of performance to take into account the impact of events which Ofcom considers to be exceptional, and which affected its performance. However, for the purpose of this investigation we did not consider it appropriate to make any such adjustments.

This means that, including the confidence interval, Royal Mail:

Achieved 74.7% against a target of 93%, for First Class mail, meaning 18.3 percentage points below the First Class target.
Achieved 92.7% against a target of 98.5%, for Second Class mail, meaning 5.8 percentage points below the Second Class target.
While there were welcome improvements in Royal Mail’s performance between January and March 2024 (the final quarter of the period), this was not enough to prevent a significant breach. Ultimately, this meant that consumers were left with an unreliable and poor quality service that saw little improvement on the previous year’s reported performance – a year which was marked by substantial disruption including 18 days of strike action.

Ofcom takes compliance with performance targets very seriously and has imposed a financial penalty of £10.5 million on Royal Mail. We consider that this penalty, which was set in line with our Penalty Guidelines, is appropriate and proportionate and will provide Royal Mail with a clear incentive to consistently improve outcomes for consumers. At a minimum we expect to see a clear, credible and publicly communicated plan setting out how Royal Mail will improve which, in practice, delivers meaningful, sustainable and continuous improvement.

The penalty amount includes a 30% discount from the penalty Ofcom would otherwise have imposed. The discount reflects Royal Mail’s admissions of liability and its agreement to settle which has allowed Ofcom to bring this matter to a close more swiftly.

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https://www.ofcom.org.uk/post/royal-mai ... s%20centre

Ofcom fines Royal Mail £10.5m for poor delivery performance

Second sanction in just over a year as Royal Mail fails to significantly improve service levels
74.7% of First Class mail and 92.7% of Second Class delivered on time, well short of target 93% and 98.5%
Ofcom passes fine in full to the public purse

Ofcom has today fined Royal Mail £10,500,000 for failing to meet its First and Second Class delivery targets in the 2023/24 financial year.

This is the second time we have found the company in breach of its regulatory obligations in recent years, after we fined it £5.6m in November 2023 for its performance in 2022/23. [1]

How we measure performance
Ofcom’s rules require Royal Mail to deliver, in each financial year, 93% of First Class mail within one working day of collection and 98.5% of Second Class mail within three working days of collection. [2]

If Royal Mail misses its annual targets, we can consider evidence of any exceptional circumstances beyond the company’s control – such as the Covid-19 pandemic – and whether it would have achieved its targets had those events not occurred.

What our investigation found
From April 2023 to March 2024, Royal Mail only delivered 74.7% of First Class mail on time and 92.7% of Second Class mail on time. The company blamed its poor performance on its challenging financial position, and delays to the ballot on a deal that followed the previous year’s industrial action.

We do not consider either of these to be justifiable reasons for Royal Mail’s failure to provide the levels of service expected of it. Ultimately, it is for the company to manage its financial position taking account of its obligations.

We have therefore decided that the company breached its obligations by failing to provide an acceptable level of service without justification. Royal Mail took insufficient and ineffective steps to try and prevent this failure, which is likely to have impacted millions of customers who did not get the service they paid for.

Action to improve performance
As well as fining the company, we have been pressing Royal Mail regularly on what it is doing to turn things around. While there has been some progress, its overall performance in 2023/24 was only marginally better than its reported performance in 2022/23, and it needs to do much better.

At a minimum we expect to see a clear, credible and publicly-communicated plan setting out how Royal Mail will get back on track through meaningful, sustainable and continuous improvements for customers.

Having failed to hit its targets in 2022/23, Royal Mail did not set out a clear improvement plan for 2023/24. Following engagement with Ofcom, the company published an update on its improvement plans in May this year, and we will be holding it to account for delivering a better service.

Financial penalty
When deciding how much to fine a company, we are required to consider what is appropriate and proportionate.

In deciding on the level of this fine, we have considered the harm suffered by customers as a result of Royal Mail’s poor service. Ofcom also has a duty to ensure the universal postal service is financially sustainable, so we have also taken account of the fact that Royal Mail has been losing hundreds of millions of pounds.

The financial penalty of £10,500,000 will be passed in full to HM Treasury. The fine includes a 30% reduction from the £15,000,000 we would otherwise have imposed, reflecting Royal Mail’s admissions of liability and agreement to settle the case.

With millions of letters arriving late, far too many people aren’t getting what they pay for when they buy a stamp. Royal Mail’s poor service is now eroding public trust in one of the UK’s oldest institutions.

This is the second time we’ve fined the company since the pandemic. Royal Mail has provided an improvement plan, and we’re seeing some signs of progress, but it must go further and faster to deliver the service that people expect.

- Ian Strawhorne, Ofcom Director of Enforcement