Royal Mail reform will not take place before general election, says Ofcom

<span>Ofcom has been studying options to reform the universal service obligation, which gives Royal Mail the remit to deliver nationwide, six days a week.</span><span>Photograph: Andy Rain/EPA</span>

Ofcom has been studying options to reform the universal service obligation, which gives Royal Mail the remit to deliver nationwide, six days a week.Photograph: Andy Rain/EPA

A shake-up of the postal service that could hand the owner of Royal Mail a £300m boost will not take place before the general election, it has emerged, as the company’s bosses meet ministers to discuss its proposed £3.5bn takeover by a Czech billionaire.

The industry regulator, Ofcom, has been studying options to reform the universal service obligation (USO), which gives Royal Mail the remit to deliver nationwide, six days a week.

Ofcom has said an update to the process, which could see the regulator allow struggling Royal Mail to cut back its service, is due this summer.

However, the Guardian understands that Ofcom does not expect to implement any reforms until after the forthcoming general election, which could take place as late as January, and potentially as late as the second half of 2025.

The communications watchdog’s work has taken on extra importance since the emergence of takeover interest in Royal Mail’s owner, International Distributions Services (IDS), from its largest shareholder, the Czech energy tycoon Daniel Křetínský. On Wednesday, the IDS board backed a 370p a share bid by Křetínský’s EP Group.

The lengthy reform process represents a blow for Martin Seidenberg, the chief executive of IDS, who recently called on regulators to begin consulting on recommendations as early as this summer in an investor presentation. “Reform is in the regulator’s hands and we urge Ofcom to accelerate their review,” the company said.

Related: Czech billionaire’s bid for Royal Mail is problematic from every angle

Earlier this year, Ofcom laid out reform options, including reducing the service to as little as three days a week. In response, Royal Mail asked to be allowed to water down its second class delivery service to only deliver every other weekday, saving £300m and cutting nearly 1,000 jobs.

A source close to Ofcom’s work said: “It is possible to do what Royal Mail wants without changing legislation – making the process quicker – but the election makes the timing very difficult to do anything this side of Christmas.

“There has been a huge response to the original call for input. There will be a brief update in July summarising the responses and giving an update, but full recommendations will not come before an election, particularly given purdah [the restriction on civil servants’ activities before an election].”

It is understood full recommendations are likely to be followed by a three-month consultation, and then a further gap until their implementation. Royal Mail wants to make its network more efficient as it struggles to deliver on time amid falling letter volumes and stiff competition on parcels.

An industry source said: “Regulators do not want to allow Royal Mail to degrade the service by allowing it to slow down, without getting better quality of service.”

Křetínský’s £3.5bn bid, sweetened from an earlier £3.1bn, has added significance to a long-planned meeting between Seidenberg and the business secretary, Kemi Badenoch, on Thursday. Sources said the pair had planned to discuss the potential USO reforms, but the bid will now also be on the agenda.

Ahead of the meeting, Rishi Sunak’s spokesperson said the government “will engage at the relevant point in the process to outline our expectations”, adding that regulators would also be involved.

On backing Křetínský’s offer, IDS said EP Group had agreed to “undertakings”, including keeping its brand and maintaining a service delivering first-class letters six days a week.

Related: Royal Mail owner backs £3.5bn takeover offer by Czech billionaire

Labour’s shadow business secretary, Jonathan Reynolds, has written to Křetínský, who is also the part-owner of West Ham United, to commit to “safeguards” if the deal is completed, including maintaining the universal service and keeping its headquarters in the UK.

Royal Mail, which was privatised in 2013, lost £319m in the first half of its financial year and IDS will report group annual results next week. Late last month, the credit analysis firm Dun & Bradstreet rated the company as at “high risk of severe financial stress”.

Ofcom said: “We have received thousands of responses to our call for evidence on the future of the universal postal service. We’re now examining these carefully before finalising our next steps. We’d like to thank all those who have contributed to the national debate on this important issue, and we’ll be providing an update on this work in the summer.”



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