Royal Mail announces rise of first-class stamp to 85p

postage stamp

Royal Mail is raising the price of a first-class stamp by an inflation-busting 9p to 85p.

That means prices will have jumped by 21% since March. As a result, a first-class stamp will cost more than double what it did in 2010.

The increase will take effect on 1 January, when the price of a second-class stamp will increase by 1p to 66p. Prices for parcels, signed-for letters and other items will also go up.

Royal Mail said despite the rise, its stamp prices were “among the best value in Europe”. The company put much of the blame for the increase on the Covid-19 pandemic, which it said had triggered a sharp fall in letter volumes.

This in turn has had a significant impact on the finances of Royal Mail’s so-called universal service, which lost £180m in the first half of the year. This requires the company to be able to deliver to 31m homes and businesses across the UK.

Prices previously increased on 23 March, when the cost of a first-class stamp rose by 6p to 76p and the cost of second-class was climbed by 4p to 65p.

In 2010, first- and second-class stamps cost 41p and 32p respectively. In 2000, it was 27p and 19p.

Mike Cherry, the national chair of the Federation of Small Businesses, said when the cost of doing business was already rising across the board, “this latest rise in stamp costs for letters and for parcels is just another expense that small businesses will be forced to carry, affecting small firms that rely on Royal Mail as a major part of their business”.

He added: “Price hikes like this only prevent small firms from being able to grow and succeed, and we should be doing all we can to support this and not hinder it.”

However, Royal Mail said: “We have considered any pricing changes very carefully and in doing so have sought to minimise any impact on our customers. These changes are necessary to help ensure the sustainability of the one-price-goes-anywhere universal service.”

The latest increases come days after the postal regulator, Ofcom, called on Royal Mail to “become more efficient” so it could sustain the universal service and keep up with the changing needs of the public.

Royal Mail did, however, move a step closer to scrapping Saturday letter deliveries after Ofcom research found there would be no significant impact on consumers.

Ofcom, which estimates the move could save Royal Mail £225m a year, said cutting Saturday deliveries would still allow the company to “meet the needs of nearly all people and businesses”.

The regulator acknowledged that the postal market had changed dramatically in recent years, with the number of letters people send and receive falling by about 5% each year since 2015.

But it said that while the pandemic had made 2020 a particularly challenging year, “the issues facing the company due to the changing market and consumer behaviour were apparent before the pandemic started to have an impact”.

The company pointed out that it had racked up significant extra costs totalling £85m in six months as a result of the coronavirus crisis.