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

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.

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 2023/24.

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; and
• deliver 98.5% of second class mail within three working days of collection

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

On 24 May 2024, Royal Mail announced that it did not meet the above performance targets in the 2023/24 period, as it:

• delivered 74.5% of first class mail within one working day of collection; and
• delivered 92.4% of second class mail within three working days of collection

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 2023/24 regulatory period, taking into account the impact of any events which Ofcom considers to be exceptional and which affected Royal Mail’s performance;
• the steps Royal Mail has taken to improve its performance since the conclusion of our 2022/23 investigation and any impacts these steps have had on quality of service. In particular, we will consider what Royal Mail has done to improve its control, visibility and oversight of delivery offices; 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.