Royal Mail is held back by out-of-date red tape

Oliver Gill
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Would Royal Mail's share price get the royal seal of approval? (Source: Getty)

Any semblance of Royal Mail investor positivity quickly ebbed away yesterday morning as markets processed an explicit warning within the postal giant's half-year figures.

The threat of a Christmas walkout continues to loom and it could be painful, the 501-year-old firm said.

Talks with Royal Mail’s 110,000-strong union, the CWU, over changes to working conditions and the closing of its pension scheme remain in deadlock. They are widely accepted as the biggest weight on the company’s stock market valuation.

Read more: Union votes in favour of Royal Mail strikes

Warnings aside, the contrast in Royal Mail’s half-year figures was quite startling.

UK letter volumes are in seemingly terminal decline and the growth in online-boosted parcel deliveries at home only just manages to offset falling revenues.

Overseas, however, the firm is going great guns. Operating profits grew by almost a quarter – a trend that has been brewing for a while.

Read more: Royal Mail files injunction to halt 'unlawful' strike

Why such a difference? No doubt, there are a number of things at play here. But one differentiator can be traced back to Royal Mail’s privatisation promises.

The so-called “universal service obligation” (USO) mandates that Royal Mail makes first and second class deliveries for letters and small parcels. It also caps some prices it can charge and holds the firm to account for delivery performance.

Around the rest of the world, where it is not a “designated postal provider”, GLS – Royal Mail’s global arm – is free from the regulation it faces in the domestic market.

The service obligation is stands in contrast to the rules under which delivery rivals such as Amazon or Hermes operate.

While first and second class deliveries are something Britain is quite rightly proud of, some are asking whether such requirements are emblematic of regulation which is lagging behind. Has the time come to free Royal Mail from such a millstone around its neck?

The USO sits at the heart of some of the changes Royal Mail wants to introduce to compete with the Amazons of this world.

But the posties are angry because the firm expects them to ensure letters are through the door first thing in the morning while also competing with anytime and next-day delivery competitors.

Releasing, or at least amending, regulatory shackles dating back to 2011 may not only help Royal Mail’s finances at home - but appease the workforce, too.

Privately, at least, this could be one piece of common ground between the union and its employer.

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