Royal Mail to increase price of first-class stamps

Royal Mail put the interests of its business customers firmly ahead of personal users yesterday by increasing the cost of first-class postage in a move designed to prepare the organisation for open competition in 2006.

Royal Mail put the interests of its business customers firmly ahead of personal users yesterday by increasing the cost of first-class postage in a move designed to prepare the organisation for open competition in 2006.

Adam Crozier, the chief executive, announced he would raise the price of a first-class stamp by 2p to 30p from 7 April next year, and said that the public could no longer expect to be subsidised by business customers.

The second-class stamp will stay at 21p and prices will fall for some business services, including Mailsort and CleanMail. Mr Crozier said: "Royal Mail last year lost about 5p for every first-class stamped letter and about 9p for every second-class stamped letter. Business customers cover those costs. As more competitors chase those big customers, we need to reduce that subsidy if we are to compete on a fair and equal basis."

The UK mail market will potentially become fully open to competition from January 2006.

Royal Mail also announced that it will return another £7m to bulk business customers for the disruption caused by last autumn's unofficial strikes, bringing the total compensation to nearly £60m.

Malcolm Bruce MP, the Liberal Democrat spokesman for trade and industry, hit out at the changes. He said: "Putting up postage prices before delivering on performance targets will irritate a lot of Royal Mail's customers. Royal Mail must ensure the extra revenue generated by this price rise will be used to improve its performance quickly or people may feel it is abusing its monopoly position."

Mr Crozier pointed out that UK first-class postage will still be cheaper than anywhere else in the European Union, where the average first-class stamp costs 36p. In Spain a 60g letter costs 45p to send, 79p in France, 95p in Germany and £1.12 in Italy.