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News - 12 December 2006

Can we afford to lose any more post offices?

The Government is threatening to halve the already depleted number of post offices in the UK. Before Labour came into power there were in the region of 56,000 post offices. Now there are just 14,500 and in future we may have just 7,000.

Small businesses need to have easy access to a post office. Even though more and more correspondence is done over the Internet there is still a need for surface mail and businesses are concerned that this need is not being recognised.

The Federation of Small Businesses has called for a sustained approach from regulators to preserve the existing levels of post offices across the UK and to improve the postal service offered to small business customers by Royal Mail.

The survey of more than 3,000 small businesses across the UK found that post offices were vital to the survival of 82% of them. It also found that the introduction of Pricing in Proportion (PiP) by Royal Mail has increased postage costs for 43% of firms and time spent on preparing the mail for 44% of businesses. About 48% of companies reported that their mail arrives later than it used to before the Single Daily Delivery was introduced.

Clive Davenport, FSB Trade and Industry Chairman, said, "It is impossible to overstate how vital the postal system is to small firms and to the UK economy. With small firms employing 58% of the private sector workforce, the Government has to commit to supporting the future of post offices. Greater scrutiny of Royal Mail is also required.

"In terms of paying bills and invoicing customers the postal service remains the only small business choice despite the increasing use of new technology. This is partly explained because of recent closures of high street bank branches.

"The future of post offices cannot be considered in isolation and policy decisions, such as the post office card account, have to be made with the bigger picture in mind. Unintended consequences from such decisions could spell disaster for the UK economy. This can and should be avoided."

The survey of FSB members found:

  • 88% of small firms send mail every day.
  • 69% send invoices through the post.
  • 87% of all mail is business mail.
  • 41% of firms use the postal system to order goods on which the running of their business depends.
  • Since the Royal Mail merged first and second posts into the Single Daily Delivery (SDD) in 2004 48% report that their mail arrives later and 31% feel that the service has worsened since SSD was introduced.
  • 94% of small firms use Royal Mail exclusively. This is mainly because either they were not aware of other choices or that competitors to Royal Mail were not interested in serving small firms.
  • 43% of firms have seen an increase in their postal costs since Pricing in Proportion (PiP) was introduced in August 2006. 44% have had to spend more time on dealing with post since PiP was implemented.
  • 97% say that the post office has a role to play in the local community.
  • 82% believe that the closure of their local post office would have a significant impact on their business.

The report concludes:

  • Small businesses almost exclusively use Royal Mail plc for their mailing solutions. It is therefore crucial for Royal Mail plc's performance to be assessed independently, to ensure the best service for small businesses.
  • Small businesses need consistency in delivery and collection times to minimise disruption to small business activity and performance.
  • Postcomm must ensure that a liberalised postal market creates a level playing field for all businesses large or small.
  • Small businesses are loyal users of the post office. The uncertainty surrounding the future of the post office network is detrimental to the small business community, including sub-postmasters.
  • There seems to be political discord on this issue and the Government urgently needs to take a strategic decision to give assurance to both post office users and sub-postmasters.
  • Small businesses are a growing, dynamic business sector. Their demands from the postal market will not wane.
  • All too often, the postal infrastructure has overlooked the needs of small businesses. The future success of the UK small business sector would benefit from targeted policies created with the small business in mind.

The report recommends:

  • Postcomm must ensure that Royal Mail plc delivery and collection times do not disrupt the activities and subsequent performance of UK businesses.
  • Royal Mail plc's targets must be audited by an independent assessor.
  • Postcomm must monitor the development of competition to ensure that "cherry-picking" is not to the detriment of rural or less profitable areas
  • More support and information must be given to small businesses about the developing postal market through Postcomm publicity
  • Royal Mail plc to consider mitigation on an ad-hoc basis for the worst-affected small businesses.
  • Banking facilities that are available at the post office (all current accounts and Nationwide building society accounts can be accessed) need to be publicised. Many customers do not know that they can access cash and pay bills at the post office.
  • The DTI needs to make an urgent announcement on the future of the postal network. We accept that many sub-post offices are loss-making, but this loss needs to be addressed and the social element of the network needs to be taken into account, possibly as a separate entity from the profit-making arm of the business.
  • In the open postal market, sub-postmasters should be able to handle post from all licensed operators. At the moment, they can only handle post from Royal Mail plc. This disparity must be addressed by allowing post office counters to handle all mail.


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