Market Profile 2005-06 - source: Postcomm annual report 2005-06

Market size, growth, and share

Within the UK, in 2004/05, approximately 22 billion items (with associated revenue of around £6.5 billion¹) were handled by all operators in the addressed mail market². The licensed area (for mail weighing up to 350g and costing up to £1) comprises around 72% of this market by revenue and Royal Mail is the dominant player. Other providers of mail services operate mainly in areas outside the licensed area.

Businesses send around 87% of all mail in the UK licensed postal market: of this about 60% goes from businesses to consumers (B2C); and about 27% from businesses to businesses (B2B). Consumers post around 13% of mail items: about 10% of it to other households (C2C) and about 3% to businesses (C2B).

The total letters market (for the licensed area) has continued to grow, accounting for 20.3 billion items in the year ending 31 March 2005, which was principally driven by a rise in Royal Mail’s volumes from 2003/04. This underlying trend continued into 2005/06, with mail volume growth (December 04 to December 05) standing at 0.7%.

Royal Mail accounts for more than 96% of the regulated market.

Market entry to date

Since the introduction of competition, new operators have targeted niche and value added services for business customers and a number of companies have now signed access arrangements with Royal Mail.

Access enables alternative operators to compete with Royal Mail’s upstream activities (collection, sortation and trunking) and then access Royal Mail’s network for final delivery of their mail. UK Mail was the first company to agree access arrangements with Royal Mail, offering a two-day mail delivery service with track-and-trace up to the point of handover to Royal Mail. A number of other companies have subsequently signed access agreements with Royal Mail (including several direct customer access agreements).

End-to-end volumes

Volumes carried by new providers continue to rise, accounting for 106 million items in 2004/05, compared to 57 million items in 2003/04. However alternative providers account for just 0.2%³ of end-to-end volumes in the licensed area.

Access and consolidation volumes

Access volumes have grown rapidly. A number of large companies have switched to access services provided by alternative providers, or have negotiated direct customer access agreements with Royal Mail (several licensed alternative providers do the trunking for these customers).

Total access volumes (direct customer access and alternative provider access) accounted for approximately 381 million items (£51 million by revenue) by the half year 2005/06, compared with 87 million access items over the full year in 2004/05.

Access volumes now account for around 121 million items per month (as at December 2005), with alternative provider access accounting for 45% of this total.

¹ Source: Royal Mail.

² Defined as distribution within the UK of physical text and packages up to 10kg.

³ As at quarter 3 2005/06