Market profile - source: annual report 2004-05

The UK mail market was worth over £7 billion in 2004 and has been growing at around 2% per annum over the past five years; the licensed sector accounts for approximately 67% of this market.

Businesses send around 86% of all mail in the UK licensed postal market: about 58% goes from businesses to consumers (B2C); and about 28% from businesses to businesses (B2B). Consumers post around 14% of mail items: about 9% to other households (C2C) and about 5% to businesses (C2B).

The total letters market (for the licensed area) has continued to grow, accounting for 19.3 billion items in the year ending 31 March 2004, which is principally driven by the 2% rise in Royal Mail’s volumes from 2002-03.

Market entry to date

Since the introduction of competition, new operators have targeted niche and value added services for business customers. The table summarises the services that new operators are currently offering in the licensed area. There are now nine alternative operators active in the market.

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 use Royal Mail’s network for final delivery. 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. Five other companies have subsequently signed access agreements with Royal Mail.

Services currently provided by new operators in the licensed area
Mail Room
Services		 Bulk mail
end-to-end		 Consolidation Enhanced
document exchange		 Tracked
B2B		 Other licensed
mail
AMP    Y         
DHL Global Mail      Y       
Express    Y         
DX Network Services    Y    Y  Y   
Securicor  Y           
Speedmail  Y  Y  Y    Y  Y 
TNT (LTSB & RBS)  Y           
TNT Mail (TPG)      Y       
UK Mail      Y       

Securicor (now operating as DHL) and Speedmail are wholly-owned subsidiaries of Deutsche Post Global Mail UK.  TNT Mail is a wholly-owned subsidiary of TPG the Dutch postal operator. Source: Postcomm. 

End-to-end volumes

Volumes carried by new operators continue to rise, accounting for 57 million items in 2003-04, compared to 51 million items in 2002-03. Overall, Royal Mail continues to dominate postal services, accounting for over 99% market share by volume in 2003-04.

End-to-end letter operator volumes (million items)1(licensed area) 2002-03 to 2004-05 (to year end 31 March)
Operator 2002-03 2003-04 2004-05
Royal Mail  18,865  19,216  19,600 
Non-Royal Mail operator
E2E 		        51         57         76 
Total E2E market  18,916  19,273  19,676 
Growth            -      1.9%      2.1% 
Royal Mail market share  99.73%  99.70%  99.62% 
Non-Royal Mail operators
market share 		   0.27%    0.30%    0.38% 

Source: Postcomm

1 Excludes access volumes.
2 Based on Postcomm’s forecast for the remainder of the financial year.
3 These volume figures are calculated from revenue-derived data received monthly from Royal Mail covering ‘UK Mails’. Royal Mail defines ‘UK Mails’ as including all letter products, Special Delivery and parcel services that Royal Mail defines as being provided under the USO and mail order returns (it excludes international USO traffic). Volumes authorised or required by Royal Mail’s licence accounted for approximately 96.5% of ‘UK Mails’. The figures are adjusted to reflect this.

Access and consolidation volumes

Operators forecast a total consolidation volume of 111 million items in 2004-05 (compared to 76 million end-to-end items).

If it is assumed that access volumes count for 50% of one whole postal item (reflecting the broad split of upstream and downstream activities), then combined access and end-to-end volumes conveyed by operators other than Royal Mail amounted to about 132 million items in 2004-05. This is equivalent to 0.66% of the total regulated market.

Market revenues

Overall, Royal Mail’s revenue grew by 5.4% in the year ending 31 March 2004.  This was driven by tariff increases in May 2003, and a 1.6% rise in volumes.

New operators experienced a 12% increase in mail revenues in the year ending 31 March 2004, reflecting the growth in their volumes, given that their average unit revenue decreased compared to the previous year. New operators’ revenues accounted for £14 million (0.3% of the total market) in 2003-04.

Letters market (licensed area up to 350g) by revenue (£million)
2002-03 2003-04
Royal Mail1     4,417     4,655 
Change            -      5.4% 
Total non-Royal Mail operators          12          14 
Change            -    11.5% 
Total market     4,430     4,669 
Change            -      5.4% 
Royal Mail's market share  99.72%  99.71% 
Total non-Royal Mail market share     0.28%    0.29% 

Source: Postcomm 2002-03

1These revenue figures are approximate and are derived from data received from Royal Mail covering ‘UK Mails’. Royal Mail defines ‘UK Mails’ as including all letter products, Special Delivery and parcel services that Royal Mail defines as being provided under the universal service obligation (USO) and mail order returns (it excludes international USO traffic). Licensed revenue accounts for approximately 79.4% of ‘UK Mails’. The figures are adjusted to reflect this.