Royal Mail blow to small businesses

Rui Vieira/PA

With the Royal Mail price hikes set to kick in on 30th April, stories of stockpiling and rationing are rife throughout the country.

It is little surprise given the huge impact on small business who rely heavily on Royal Mail to send out orders and correspondence. So what will they do now?

There are concerns that the price increases, which see the cost of first class stamp rise from 46p to 60p, and second class from 36p to 50p, will price many small businesses out of the first class market and force them to look for alternative methods to reach their customers.

Royal Mail said parcel prices need to reflect the cost of handling and delivering them and is increasing the price of its stamped and meter packet services by an average 15%.

The current five-tier pricing structure for parcels up to 1kg is being replaced with two tiers, which will hike the cost of sending many packages, while reducing the cost of others.

"With 84% of small firms dependent on Royal Mail, it is welcome news that they will receive discounts on some products," said John Walker, National Chairman, Federation of Small Businesses.

"However, it does not go far enough. Rapidly raising stamp prices now will be bad for business . With small businesses and consumers being hit by other rising costs, this has come in at a time when they can ill-afford it."

Increase in overheads
Like many small business owners, Rupert Cross of graphic design agency 5874 Design and online gift boutique,, is reassessing his delivery options.

"With the Royal Mail price rises, our overheads are going to rise by 30%. We currently send all orders under £50 and under a kilo, by Royal Mail first class postage. Royal Mail has already proved that sending anything of any value with the service is a waste of time due to the poor complaints procedure... it is easier to self insure or send via courier," explains Cross.

"Assuming the couriers don't take this as an opportunity to put up their prices, we'll simply be sending more items with them and not the Royal Mail. But we are going to have to revaluate what we charge for postage on small orders - currently £3.50 on orders under £35.00 within the UK."

Couriers cheaper and better
For many other business, the round of price hikes simply reaffirms their decision to move away from using Royal Mail as their primary delivery source. For example, garden games and equipment company, Big Game Hunters, has now switched from Royal Mail to soley using couriers for their stock, which ranges from climbing frames and trampolines to sports balls.

"The Royal Mail price increase has not as much affected our business but Royal Mail's business from us," explains marketing executive, Abbi Stewert. "With the price increase, the couriers really became our only option – and the service they offer is better.

"Around 98% of the time the couriers we use will deliver guaranteed next day, including a signature on delivery. Royal Mail cannot guarantee such a service, so this together with costing much more, gives us no incentive to use them."

The price hikes are also likely to mean than days are number for sending postal correspondence, such as reminders for medical, dental and opticians practices, with many businesses now forced to switch to free digital methods like email and text message.

"We were sending out all invoices via post, but have now implemented an email system for this in order to save money," adds Stewart.

Royal Mail price increases
Source: Royal Mail

First-class stamp increase from 46p to 60p

  • Second-class stamp increase from 36p to 50p
  • Large letter up to 100g: first-class increase from 75p to 90p
  • Large letter up 100g: second-class increase from 58p to 69p

  • First-class up to 750g increases from £1.58 - 3.05 to £2.70
  • Second-class up to 750g increases from £1.33 - £2.61 to £2.20

  • First-class 100g franked letter increase from 39p to 44p
  • Second-class 100g franked letter increase from 28p to 31p
  • Recorded signed for item increase from 77p to 95p
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