Royal Mail prices rise average 11% from 2nd April 2012
Royal Mail have announced a new contract services ratecard for Royal Mail prices (opens in .pdf) which become effective on the 2nd April 2012. These prices are subject to a final Ofcom announcement at the end of March but are expected to be approved without change.
The net result of the price changes is an average 11% price increase across Royal Mail’s range of services. However in certain areas the price increase will be significantly greater.
Packetpost Price Changes
The biggest rise in prices will be for Packetpost users. Whilst the pricing for Large Letters is increasing Packetpost packet prices are losing the smallest weight bands to be replaced by a 0-750g price bracket. This has the effect of increasing a 100g packet price by almost 64% from £1.336 to £2.19 and 101-250g packets will also cost £2.19 up from £1.66.
If you use PacketPost to ship low weight packets rather than large letters you’ll be facing a serious increase in your postage costs. This will affect sellers of items such as mobile phone chargers which are relatively light weight but are too bulky to be classed as Large Letters (Large Letters are up to 353mm x 250mm x 25mm thick).
Regardless of whether you ship with chargeable post or offer free post to customers, you’ll need to assess the impact of the price changes and how they’ll affect your business.
VAT on Royal Mail Services
Don’t forget that Royal Mail have already announced that all their bulk mail services will attract VAT from April 2012. Packetpost users will also now be paying VAT on postage prices which isn’t included in the the prices shown above and some Royal Mail services already attract VAT. There is a page on the Royal Mail website setting out Royal Mail services which will attract VAT from 2nd April 2012.
New account payment channel for VAT exempt 1st and 2nd class mail
Royal Mail will introduce a new account payment channel for 1st Class and 2nd Class mail on 2nd April 2012 to offer an alternative to other account services. There will be no volume discounts but the advantage is that the new service will remain VAT exempt suiting sellers who are not VAT registered or use the Flat Rate VAT scheme and are unable to reclaim VAT.
The new product will initially adopt last years (the current) prices but be prepared for a price increase mid-April in line with price increases for franked and stamped mail.
Calculating the cost impact on your business
If you use Special Delivery, Tracked, or Packets you can check the 2011 and 2012 prices with the Royal Mail Packet Price Calculator on the Royal Mail website to give an indication of the new prices you’ll be facing.
For other Royal Mail products you need to check the 2012 Proposed Price for Contract Services PDF document on the Royal Mail website.
Remember if you access Royal Mail public tariff rates (those available through Online Postage and at Post Offices) the price changes for these will be published in late March.
Royal Mail told us:
We know how hard it is for businesses when the economy is as tough as it is now. No-one likes to raise prices in the current economic climate. Mail volumes have fallen by around 25 per cent since 2006 and the regulatory regime has meant that prices have been artificially low. Royal Mail has made a loss on its core mails, including packet, activities of almost £1 billion over the last four financial years. That is not sustainable for any business so we need to better align prices with the cost of providing our services.
Since 2006, Royal Mail’s cashflows have been £3 billion less than anticipated. There has been significant under investment in Royal Mail for a number of years. Including in crucial areas like IT where we really lag behind our main competitors. We need to make a commercial rate of return so that we can invest in the business for the benefit of all our customers
Price rises are not enough to keep Royal Mail at the centre of UK life – we have embarked on our own major self-help programme. We have closed 14 mail centres in the last three years. Around 50,000 people have left their jobs at Royal Mail over the last ten years. This is a painful process of change, but one we are committed to completing.
At the same time, we are launching the biggest improvement to our contract mail products since they were first introduced. The market has changed a lot in recent years, so we are improving our portfolio to better reflect those changes and make it more relevant to your business needs. The improved portfolio of products are more accessible, simpler to understand and easier to use.