Royal Mail hit by competition

Updated 11.40 Thu May 08 2008

Keywords: Adam crozier, Royal Mail

A sharp decline in mail volumes and industry competition are being blamed for a huge drop in Royal Mail's profits.

The group's profits have fallen by almost a third to £162 million, the lowest figure for five years.

The group's profits have fallen by almost a third to £162 million, the lowest figure for five years

The letters business recorded a loss of £3 million. The universal postal service under which letters are delivered anywhere in the UK for the same price lost £100 million according to the figures for the 2007/8 financial year.

The financial results were published just days after an independent review reported that competition had not delivered positive results for consumers and smaller firms.

Adam Crozier, the Royal Mail's chief executive, said: "The £162 million operating profit is a robust financial performance, ahead of expectations, in a year when we faced many difficult challenges.

"But we secured a landmark agreement on modernisation and pensions and are pressing ahead with the vital investment in and modernisation of Royal Mail letters to ensure it competes successfully in a market where volumes are falling and competitive pressures are increasing."

The Royal Mail is handling three million fewer letters a day than a year ago and revenues have fallen further as more people use second-class rather than first-class mail.