Ofcom plans to retain safeguard cap on stamp prices for second class letters

• Proposals would ensure affordable options for sending letters and cards are available for all
• Average price of second class letter stamps would not rise by more than inflation each year
• Average household spends less than £1 a week on all post – just 0.19% of all expenditure
• But new research confirms that sending post remains important to people in the digital age

The price to send letters second class will be pegged to inflation until at least 2029 so postal services remain affordable, under new proposals announced today by Ofcom.

As the universal postal service provider, Royal Mail is required to deliver letters six days a week and parcels five days a week to every address in the UK, at an affordable and uniform price.

To make sure the universal service remains affordable – and Royal Mail can recover its costs – Ofcom periodically reviews whether stamp prices should be capped. We set our last cap in 2019 for five years, and are now reviewing prices for the period April 2024 to March 2029.

Royal Mail continues to be the only national scale provider of end-to-end delivery of letters in the UK. This means we cannot rely on competition to ensure prices remain affordable.

So today, we have proposed to retain a safeguard cap on second class letters, and that on average these prices should rise by no more than inflation (CPI) from today’s prices.^[1]

What’s in the post?

Ofcom’s latest research has found that people’s use of postal services continues to shift. Seven in ten (68%) now prefer to send emails rather than letters whenever possible. And many users report sending fewer personal letters (-21%), greetings cards, invitations and postcards (-20%) and formal letters (-19%) compared to two years ago.^[2]

Nonetheless, two-thirds of people still post a letter each month, while participants from our in-depth interviews told us how important it was to them to send and receive physical birthday and Christmas cards, to keep in touch with family and friends – particularly with those less digitally confident.^[3]

Spending on sending

According to the ONS, in 2020/21 the average household spent 90p per week on all postal services, representing 0.19% of total weekly expenditure. This includes delivery charges for items purchased online, so the average amount people spend on sending letters will be even less than this.

While our regular survey of postal users showed an increase last year in concerns about affordability, our new in-depth interviews reveal that this appeared to be driven by broader financial challenges that many consumers are currently experiencing, rather than by postal prices specifically. In fact, very few people in our new research told us that sending letters or cards was unaffordable to the extent that they could not send them.

“We might not be sending as many letters as we used to; but when we do, it can be an important way for family and friends to keep in touch.

“So we’re proposing that stamp prices for second class letters should only rise by inflation, and no more, to make sure there’s always an affordable option available to everyone.”

- Marina Gibbs, Ofcom's Director of Post

Financial sustainability of USO

As well as making sure postal services remain affordable, Ofcom must also have regard to the need for the universal service to be financially sustainable.

So, in setting this safeguard cap, we have sought to minimise its impact on the financial sustainability of the universal service, and considered the cost of providing these services.

Parcels competition

Unlike with letters, competition in the parcel market has grown since our 2019 review, and we expect that it will continue to grow. Competition in this market limits Royal Mail’s ability to raise prices, and has actually led to its prices reducing in real terms.

As a result, it’s our current view that Royal Mail’s parcel services should no longer be subject to a safeguard cap. Royal Mail would, however, continue to be required to set a single price for these services across the UK.

These parcel services will also remain subject to the general requirement for universal services to be affordable. If during this five-year period we have material concerns regarding affordability, we can step in to protect consumers.

Next steps

We are consulting on our proposals until 1 September 2023, and intend to publish our final decisions later this year.

Notes to editors

1. Royal Mail will be given some flexibility to set prices for individual second class letter products, which vary in size, but the weighted average overall price for the set of products in the ‘basket’ must not rise above inflation. Based on 2022/23 volumes, standard letters would make up a high proportion of the basket. This naturally more tightly constrains price increases on the more commonly used standard letters than on large letters, as a change in their prices would have a far bigger impact on the overall average than a change in other prices.
2. Ofcom residential post tracker survey, January 2022 – December 2022, 3,870 UK adult respondents. We asked whether respondents sent more or less of different types of post compared to two years ago. The figures quoted represent the net proportion that reported sending less of each type of mail.
3. Jigsaw qualitative research. 44 depth interviews were conducted either face to face or online in April and May 2023. All participants had reported either reducing their general spending (e.g. had cut down on essentials) and/or been struggling financially (e.g. had struggled to pay their regular bills) and reduced their spend and/or use of letters and cards in the last three months.