Royal Mail rival wins government contract

A rival company to the Royal Mail confirmed today it had won a £12 million postal contract from the Department for Work and Pensions.

Business Post Group said its postal company UK Mail will handle 82 million mailings from two DWP centres in the north of England, including pension and benefits statements and winter fuel payment notifications.

The Financial Times said the deal with UK Mail came as the DWP looked to cut up to £5 million from its £70 million annual bill for postage services.

The DWP is the first Whitehall department to ditch the Royal Mail in a blow to the Government-owned former postal monopoly.

Departments across Whitehall have been urged by the Cabinet Office to put their mailing operations out to tender in a bid to cut costs, threatening further losses of business for Royal Mail.

The DWP contract was awarded after a year-long trial in which post was handled by UK Mail and TNT Post, Royal Mail's leading competitors.

Business Post chief executive Guy Buswell said the firm was "delighted" to have won "this very significant contract".

"It being the first such contract awarded by central Government, it was a highly competitive process and follows a year-long trial period during which we operated alongside other independent operator," he said.

"Our expectation is that this decision will pave the way for other public sector organisations to look beyond Royal Mail for their postal service provision."

The deal is worth £12 million a year and will see UK Mail collect post from the DWP's distribution centres in Washington, Tyne and Wear, and Norcross, Lancashire, sort it and hand it over to Royal Mail for delivery.

UK Mail has already won a similar contract with the Royal Bank of Scotland, one of the three biggest largest mailers in the UK along with the DWP and HM Revenue and Customs.