£2bn postal blow to small business

New mail charges are likely to hit small business hard. John Willcock gauges the response to Consignia's proposals

Consignia's decision to charge £14 a week for having fewer than 20 letters delivered before 9am is a "poll tax on small businesses" and will cost them £2bn a year. So says the Forum of Private Business (FPB), which reacted with fury to Consignia's announcement on 11 July of the new charges. The charges, totalling over £730 a year per business, are part of a series of changes taking place in 14 pilot areas, in a three-year attempt to save the former Post Office £1bn a year. Although Consignia claims the new charges will cost small businesses an estimated total of £350m a year, the FPB puts the annual cost at £2bn.

It has already been announced that the second post is being abolished in favour of one delivery a day.

Nick Goulding, FPB's Chief Executive said: "This poll tax on SMEs could inflict serious costs on the small business community. The decision by Royal Mail to rationalise their financial problems by adding further pressure on SMEs, following on from the closure of 1,500 sub-post offices, is a serious threat to the economic role of SMEs in the country. They should not be threatened like this until alternative new business options have been explored. I'm sure the post office has the ability to return to its former iconic position in the UK's national fabric."

Sally Low, head of policy at the British Chambers of Commerce, said: "Business recognises that Royal Mail is experiencing problems. However, it cannot shift these problems on to small businesses. A cheque arriving in the mail before 9am or after noon can mark the difference between a firm surviving or folding."

The changes being piloted mean businesses receiving more than 20 letters a day will get their post delivered between 7am and 9am. Domestic households will get it between 9am and midday.

In Consignia's cost-cutting drive, a total of 17,000 jobs are to go and Consignia's name will change to Royal Mail Group at the end of the year. The postal delivery service rebranded itself as Consignia a year ago to gear up for the loss of its monopoly of UK postal delivery services. But the new name failed to catch on.

The Shadow Trade and Industry Secretary John Whittingdale added: "Many small firms rely on the Royal Mail for their cash flow and their orders and cannot afford to wait until lunchtime for a delivery. This extra charge that they will now face represents a significant additional cost and flies in the face of the assurances that have been given that those who need to receive mail in the morning will be able to do so."

Garry Parker, FPB's Director of Public Affairs, said: "We have some sympathy with the Royal Mail. Their status in the area of open competition is uncertain, due to lack of clear thinking at government level. This could be misconstrued as unfair trading practice and an abuse of a monopolistic position. They compete with parcel deliveries but not with the letter post, where there is a monopoly.

"It could be said that they are taking advantage of their status, making an extra delivery charge on a public service with no open competition."

*The pilot areas where the charge will be introduced include:

Crawley, West Sussex

Bow, east London

Edinburgh Dell

Sheringham, Norfolk

East Manchester

Llanelli, Wales

Newbury, Berks

Newhaven, East Sussex

Loughborough, Leicestershire

Halifax, West Yorkshire

Plymouth, Devon

Ballymena, Northern Ireland

Thirsk, North Yorkshire

St Helens, Merseyside