Ofcom is charged with ensuring that the universal postal service, delivered by Royal Mail, is sustainable and affordable.
Ofcom sets quality of service targets as part of the universal service and monitors performance against those targets, taking enforcement action against Royal Mail when its service quality falls below requirements. The substantial decline in letter volumes has reduced economies of scale in letter delivery. This has increased unit costs and weakened Royal Mail’s financial position, threatening the sustainability of the universal postal service. Royal Mail’s financial position means that there is some tension between the need for the universal service to be sustainable, ensuring it remains affordable and improving quality of service.
This document sets out Ofcom’s consultation proposals for the existing retail price cap on Second Class letters to be extended at its current level for one year, to 31 March 2028. This means the maximum price across the basket of these products would continue to rise no faster than inflation, as measured by CPI. We are proposing this approach while Royal Mail implements reforms to the delivery of the universal service (following our changes to regulation in July 2025) and its quality of service improvement plan, which together should have a significant impact on Royal Mail’s financial and service performance. These are crucial to establishing a sufficiently certain evidence base to determine the longer-term approach to pricing.
We have used the full extent of our powers to modernise Royal Mail’s regulatory obligations. This has enabled Royal Mail to respond to the continued decline in letter volumes and ensures that the universal service remains fit for purpose, recognising that the way people use the service has fundamentally changed. In January 2024, we set the current safeguard cap and began wider work on the future of the universal service and postal pricing. We introduced major reforms that gave Royal Mail greater flexibility in how it delivers Second Class letters. Those reforms came into effect on 28th July 2025.
Royal Mail started implementing the new operational model in June 2026, after it reached agreement with the Communication Workers Union (CWU) in April 2026. Royal Mail is now in the process of rolling out the new model across all its delivery offices and delivering its quality of service improvement plan. Those changes are expected to help improve Royal Mail’s costs, financial position and service performance, but the extent of their impacts remains unclear. Royal Mail needs to make more progress on these significant changes before we have a clear enough evidence base on which to determine our long-term approach. Therefore, we are proposing to continue our existing price cap on Second Class letters for one year, until March 2028, as a short-term solution.
Under our proposed approach we would extend the cap at its current level for one year, following its expiration in March 2027. We recognise the importance of setting the long-term approach given the pressures on the sustainability of the universal service. Therefore we plan to consult on a long-term approach to universal service and access pricing in Q1 2027/28 and issue a decision in Q3 2027/28. Our work would build on our 2025 Call for Input (CFI) on pricing and affordability and stakeholder input we received in response and subsequently.
It remains important that people have affordable access to the postal service. While we have consistently found that most people do not face affordability challenges to sending post; in 2023/24 the average household spent around £2.60 per month on postal services (this is equivalent to £0.60 per week), we also acknowledge that a small proportion of people may be more likely to face affordability issues, with those on lower incomes more likely to be vulnerable to increased postal prices. Therefore, we remain of the view that having more targeted approaches to affordability in place would have a significant impact on our approach to regulation and welcome Royal Mail’s continued consideration of a targeted discount scheme.
Responding to our consultation
Please submit responses using the response form no later than 5pm on 27 November 2026.