Royal Mail’s plan to stop delivering post on Saturdays has been blocked by the government in a blow to the company, which has claimed a six-day service is financially unsustainable.
The postal company had requested that the government change the universal service obligation (USO) – a condition of its privatisation in 2013.
However, the business department said it had no plans to adjust the requirement to deliver on Saturday as well as the five weekdays, in a response to a report by MPs on the business select committee. MPs would have to vote through any changes to the obligation.
Kevin Hollinrake, a minister at the Department for Business and Trade, wrote: “We currently have no plans to change the minimum requirements of the universal postal service as set out in the Postal Services Act 2011 … including six-day letter deliveries.”
Royal Mail has been lobbying the government to have the obligation removed as it struggles to return to profitability after an annual loss of £1bn driven by postal worker strikes as well as the longer-run drop in profitability of letter deliveries.
The regulator Ofcom has said the move could save the company up to £225m a year, and carried out polling that suggested most people in the UK were indifferent about the prospect of no weekend letter deliveries.
However, Ofcom is currently investigating Royal Mail for poor performance against the obligation. Royal Mail is required to deliver 93% of first class mail within one working day of collection and 98.5% of second class mail within three working days, but it achieved only 74% and 91% respectively over the past year.
The company was hoping that the move to weekday-only deliveries would help it in its broader ambition to shift away from letters – which are increasingly replaced by email and other electronic messages – to parcels, which have boomed thanks to the growth of online retailing.
Yet Royal Mail has struggled to get beyond disputes with unions over its future strategy. The former chief executive Simon Thompson left in May after two years in which relations with workers soured. He had announced 10,000 job cuts in October in reaction to the disruption from strikes and a decline in its parcels business.
The company has not announced a replacement chief executive, though it has agreed a deal with the Communication Workers Union that could bring an end to the turmoil. That deal would need to be passed by members, but the union has suspended its ballot, adding to uncertainty for the company.
A Royal Mail spokesperson said: “The government has said before that it has no current plans to change the USO, but it is clear that when letter volumes have declined by more than 60% since their peak in 2004-05, in order to be financially sustainable, the [USO] requires urgent reform.”
Continuing Saturday deliveries “increases the threat to the sustainability of the universal service”, the spokesperson said. “We urge the government to recognise Ofcom’s findings, to enable this change quickly, and work with us to protect the long-term sustainability of the one-price-goes-anywhere universal service.”