Royal Mail signs away postal monopoly after 300 years

Royal Mail signed a ground-breaking deal yesterday that paves the way for competitors to begin using its postal delivery network to reach every home in the country.

The agreement, struck with the private mail group Business Post, will open up the UK postal market to genuine competition for the first time in 300 years by allowing rival operators access to Royal Mail's "final mile" network of 1,400 delivery centres and 170,000 postmen.

The deal with Business Post is expected to open the way for much bigger operators such as the Dutch and German post offices to enter the UK market as it is progressively liberalised.

Royal Mail and Business Post said the terms of the agreement remained confidential. However, it is thought that Royal Mail has agreed to deliver letters on behalf of its rival for as little as 12p - the rate first proposed by the industry regulator Postcomm in May. This compares with the 28p price of a first-class stamp.

The voluntary agreement between the two companies came just two days before Postcomm was due to impose a delivery price on Royal Mail after lengthy haggling over how much it was entitled to charge Business Post.

When Postcomm announced its initial proposals in May, the Royal Mail chairman Allan Leighton accused it of "throwing a huge spanner in the works" and risking the "destruction" of the universal delivery service, which guarantees a common price for sending mail to any address in the country.

Yesterday, Adam Crozier, Royal Mail's chief executive, said he was "very pleased" with the heads of terms agreement it had struck with Business Post. The final contract is due to be signed next month, at which point the price details will be published so that other operators striking agreements with Royal Mail will know that they are being offered the same terms. The voluntary agreement between Royal Mail and Business Post should speed up the introduction of competition markedly. Had Postcomm imposed a settlement and Royal Mail chose to fight it through the UK and European courts, implementation could have been delayed for at least two years.

Guy Buswell, the managing director of the Business Post subsidiary UK Mail, said it hoped to begin services in the first quarter of next year delivering business mail.

It is aiming for 3 per cent of the market within three years, which would equate to 2 million letters a day.

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