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The overwhelming success of
Triangle’s recent UK Mail Summit was underpinned by its ability to draw
out the fundamental issues for the UK Postal services industry. The big
question on everyone’s minds and the theme for the two day forum was
“Competition – will it work?”
There were three issues at the top of the list, debated at a high level by
conference participants and the leading line-up of speakers. The issues
were VAT, access and Postcomm’s price control proposals. All of the issues
have a major impact on competition within the UK market.
Delegates and speakers expressed concern and frustration on the issue of
VAT and its unresolved position as a major barrier, something akin to
major road works to Postcomm’s market opening strategy route.
VAT
Currently Royal Mail has VAT exemption with regard to postal services.
This exemption is long standing and is often justified as a requirement of
Royal Mail’s Universal Service Provider (USP) position. This is in direct
conflict with private commercial operators and other USP’s who are
entering the UK market but do not have a VAT exemption and pay VAT at the
standard rate. Immediately this creates an artificial and unfair
competitive advantage for Royal Mail, over its competitive rivals,
particularly for charity mailing and small businesses who do not have the
opportunity to reclaim any VAT paid.
This is further complicated, when the downstream access arrangements
between new operators and Royal Mail come on stream. To access Royal
Mail’s network, you will have one operator liable to VAT and Royal Mail
providing the final mile delivery, with VAT exemption. Equally as Royal
Mail tries to outsource more and more of its activities, they are in
effect paying 17.5% more, which makes it difficult for them to compete
effectively. This hot potato is not being tackled by any authority.
Postcomm do not see this as a regulatory issue, yet the Treasury has made
no pronouncement, EU DG XV, responsible for postal services and the single
market are dragging their collective feet over the harmonization of VAT
across EU postal operators.
Access
On the same theme of competition barriers, unless access pricing and
conditions are resolved very quickly, the development of competition in
the UK market will be very slow. One of the fundamental planks in
Postcomm’s market opening strategy is the creation of bulk mail and
consolidation services, which will access Royal Mail’s network,
downstream. Yet the very conditions on how operators access the network
and the price they pay or the basis for price determination remains
unresolved. Again we have frustration and major concern. In discussion at
the summit, it is obvious that new entrants need access to Royal Mail’s
local delivery offices. Yet Royal Mail, in discussion with some operators,
is still talking about access to mail sortation centres. From both the
platform and delegates came a clear message to Postcomm to resolve access
problems and create a clear template for access pricing and conditions.
Price control
The final issue impacting on competition, which was subject to great
debate, was Postcomm’s proposal for price control. Both Royal Mail,
through Allan Leighton, and the CWU, through Billy Hayes, poured scorn on
Postcomm’s proposals and Postcomm’s positioning on major consultations.
The summit debate showed, although clients and suppliers alike recognized
what Postcomm were doing, there was little cognizance of Royal Mail’s
precarious position and the financial impact of their proposals. The key
for many was a consultative approach which was not head to head but sought
a pragmatic solution, which preserved regulatory rigour but also sought to
strike a compromise solution with Royal Mail, which would benefit users.
The end postscript was a clear signal that competition needed a healthy,
efficient and successful Royal Mail, in order for competition to flourish
in the UK.
Note
The outline for next year’s UKMS conference programme is already being
worked on by Triangle. If any individual or organisation would like to
submit papers for consideration please do so in the first instance to
davidr@triangle.eu.com
Notes to the Editor
Triangle Management Services Ltd, founded in 1984, is today the
pre-eminent independent specialist management services company within the
global mail, express, and logistics sectors. Triangle offers the following
services to clients: Recruitment, Market Research, Consultancy, Mergers &
Acquisitions and Conferences - all focussed on the mail and express
industry sectors. |
