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Under pressure

Commenting on Royal Mail’s price rises, Dr Paul Simmonds, a Senior Teaching Fellow at Warwick Business School, said: “The increases come as the Royal Mail is under pressure to improve its performance. Its shares are currently trading at 410p, well below their post-privatisation peak of 604p; they have also declined since their May 2016 peak of 541p.


“Royal Mail does face a challenging business environment. The Group half-year profits to 25th September 2016 were 5% lower at £320m and they increased their cost savings target to restore profitability. Hitherto they have been successful in achieving significant cost reductions while avoiding damaging and costly industrial action but now they face difficult negotiations with unions over further cost reduction programmes and also pensions.

“There was a significant drop following the January 2017 trading update, which said total letter revenues had dropped 5% in the nine months to 25th December compared to the same period in 2015. On the positive side, revenue from parcels had increased 3% on volumes that were up by 2%. While the 6% reduction in addressed letter volumes wasn’t surprising – it’s a long-term trend and shows no sign of abating – there has also been a significant fall in advertising (junk) mail where volumes and revenues had previously been holding up reasonably well.”

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