Investigation into Royal Mail’s quality-of-service performance in 2022/23

Following our investigation Ofcom has today issued Royal Mail with a Decision. Ofcom found that Royal Mail contravened DUSP condition 1.9.1 by failing to meet the national first class, second class and delivery routes completed targets during 2022/23. The Decision also sets out our decision to impose a financial penalty on Royal Mail for its failure to meet the first class and second class national performance targets.

Ofcom has discretion to adjust Royal Mail’s performance to take into account the impact of events which Ofcom considers to be exceptional and which affected its performance. After adjusting Royal Mail’s performance to take into account the impact of industrial action, the Stansted runway closure and the extreme heat in July, Royal Mail still failed to meet the above targets by a significant and unexplained margin.

With adjustment:

• Royal Mail’s maximum first class national performance was 82% (falling below the 93.0% target);
• Royal Mail’s maximum second class national performance was 95.5% (falling below the 98.5% target); and
• Royal Mail’s maximum delivery routes completed daily target was 89.35% (falling below the 99.90% target).

Ofcom takes compliance with performance targets very seriously and has imposed a financial penalty of £5.6 million on Royal Mail. We consider that this penalty, which was set in line with our Penalty Guidelines, is appropriate and proportionate to the seriousness of the contravention. It is also important to incentivise Royal Mail to improve its QoS performance in order to provide customers with the service they have paid for and that they can rely on.

This penalty 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.

In addition to the contravention finding, we have noted a particular concern about the operation of delivery offices, which we view as fundamental to Royal Mail meeting its QoS obligations. Issues include the need to return delivery offices to pre-Covid practices, with mail being cleared each day, and providing appropriate training and support for delivery office managers who play a key role in decision-making in local offices. We are particularly concerned about these issues in light of the high absence and vacancies in 2022/23 which meant it may have often been necessary to make “on the day” decisions about what to deliver, in circumstances where Royal Mail appears to have insufficient control, visibility and oversight over this local decision-making.

More details can be found in our news centre.

A non-confidential version of our decision will be published in due course.

Ofcom has today opened an investigation into Royal Mail’s compliance with its quality-of-service performance targets during 2022/23.

Our rules require Royal Mail to meet specified quality-of-service performance targets in the provision of universal service products. Among other targets, Royal Mail must:

• deliver 93% of first class mail within one working day of collection;
• deliver 98.5% of second class mail within three working days of collection; and
• complete 99.9% of delivery routes on each day that a delivery is required.

Performance against these targets is measured as an average performance level on an annual basis excluding the Christmas period.

On 15 May 2023, Royal Mail announced that it did not meet the above performance targets in the 2022/23 period, as it:

• delivered 73.7% of first class mail within one working day;
• delivered 90.7% of second class mail within three working days; and
• completed 89.35% of delivery routes for each day on which a delivery was required.

Ofcom takes compliance with the quality-of-service targets very seriously. In light of Royal Mail’s reported performance, Ofcom’s investigation will examine:

• whether there are reasonable grounds for believing that Royal Mail has failed to comply with its obligations under DUSP condition 1.9.1 in respect of the 2022/23 regulatory period, taking into account the impact of any events which Ofcom considers to be exceptional and which affected Royal Mail’s performance; and
• where there is a failure, whether it may be appropriate to impose a financial penalty on Royal Mail for that failure, and the level of any penalty.