A British Man's Take on Debt, Saving & Investing

The Crazy Cost of a Stamp

Posted on April 23, 2012 by Lee

It’s possible you missed the announcement by Royal Mail a few weeks ago, but a First Class stamp is set to rocket to 60p from 30th April 2012, and the alternative won’t be much cheaper, with a Second Class stamp rising to 50p. This is primarily as a result of the lifting of select government-imposed price controls.

Just last year we were all in a little bit of shock when the cost of a first class stamp rose 5p from 41p to 46p. Prior to this year’s announcement, that was the highest rise in the cost of a stamp in one go.

In a statement after a meeting with the Common’s Business Committee, Royal Mail said “We have some of the lowest stamp prices in Europe and amongst the highest service standards.”

As you read on, I think you’ll see that is clearly not true.

 

Royal Mail: Worse, Not Better

Now, relative to what the cost of a stamp and service quality used to be, this latest rise is a shocking inflation in price for a service that has traditionally only got worse, despite the volume of mail declining year on year since the inception of the internet.

As a child of the 80′s I remember the first delivery turning up around 7am, and then a second delivery about 2pm. Anything posted first class would arrive the next day almost without fail, and anything second class would arrive if not the next day, definitely within 3 days.

Now we are lucky if something posted first class turns up within 3 days, despite mail volume dropping 4% last year alone. Out of the four items I have posted first class in the last 3 months, one arrived the next day, two arrived in 2 days and one never turned up at all. Not a great advert for the beleaguered Royal Mail.

 

Price Always Up

The cost of postage has only ever gone one way in the UK, and that is up. Despite Royal Mail now setting prices up to 37% above inflation, I can’t foresee the service getting any better. Royal Mail is a large monolith that is struggling to adapt to the times, and also has a huge pension deficit to try and make up.

Graph of First Class Stamp Prices since 1980

As we can see, the April 2012 increase will be the largest ever jump in the price of a stamp in recent history.

The Royal Mail’s chief executive, Moya Greene, said the primarily state-owned business had no choice but to bump up first-class prices by 30% and second-class by 39%, having seen its mail collection and delivery unit lose nearly £1bn in four years. Mail volumes have slumped by a quarter since 2006 to “just” 59m letters and parcels a day.

59 million letters a day. That’s an income even if every single piece was posted second class standard letter, of £2.9 billion a day. I struggle to see how Royal Mail can be in such dire straights with such income, except for mis-management and waste.

 

Comparison By Country

Is the UK situation any worse or better than postal users in other countries?

While some cannot be simple “like for like” comparisons, I’ve pulled together the ‘average cost’ of standard small letters in other countries and converted the cost of the local currency into UK pounds. The majority of these rates suffice for small letters in the UK, first class carriage.

Country Domestic Rate UK Price Difference
Australia $0.60 AUD 39 pence 35% cheaper
France €0.58 EUR 48 pence 20% cheaper
Germany €0.55 EUR 45 pence 25% cheaper
USA $0.45 USD 28 pence 53% cheaper
Canada $0.61 CAD 36 pence 40% cheaper
Sweden 4.44 SEK 41 pence 32% cheaper
Russia 15.34 RUB 32 pence 47% cheaper
Japan 60 JPY 47 pence 22% cheaper
Prices checked and converted 16/04/2012



From a sample of 8 different countries selected at random, not a single one is the same price or more expensive than ours. I’d like to think this sample is fairly representative of the world, as there are communist, capitalist, european, far eastern, Americas and Australia included.

Is the situation we face in a couple of weeks any different to when the first stamp was introduced, though?

 

The First Stamp

The Penny Black – which, unsurprisingly, cost 1 penny – was the first postage stamp introduced in the UK way back in 1840. Prior to this, postage costs were actually paid by the recipient of the mail at the time of delivery. Seems cheap, doesn’t it? Even adjusting that (pre-decimalised) penny for inflation shows that the first postage stamp in the UK actually cost the equivalent of about 18p per stamp in today’s money.

So perhaps it isn’t all that bad after all, given all other points of our spending power, wages, standard of living and so on. Royal Mail will ultimately have to adapt or cease to exist, however. And the latter choice would be bad for the UK economy as that alternative would put an additional 176,000 people out of work.

Will the rise in stamp prices change your use of Royal Mail? Will you use email and other communication methods more?

 

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Category Economics, News & Statistics
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2 Comments to “The Crazy Cost of a Stamp”

  1. Ron says:

    I think this price increase is the worse decision the Royal Mail have ever made.

    I think it’s bad for old people who traditionally send more letters than young people. They’ll be hit harder than us as we’ll use email and only post if we have no alternative.

    • Lee says:

      Very true, Ron. I didn’t even think of the effect this would have on those with very fixed incomes such as retirees. Royal Mail already had a large ‘cake and eat it’ moment last time when they put the prices up.

      Now their claim of “one of the cheapest in Europe” or similar is total outrageously lie!






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