Royal Mail shares rally after watchdog lets it raise charges

Investors in Royal Mail today breathed a sigh of relief as the postal regulator backed away from imposing new price caps on some services, giving it an opportunity to raise the cost of posting a letter.

Ofcom has been reviewing the postal market amid concerns that the universal postal service was not financially sustainable.

However, the regulator said that Royal Mail’s obligation to deliver to every address in the UK, six days a week, for the same price was sustainable and that competition in the market was working well. The shares rallied, up 2.2% to 532p.

Ofcom said 56% of all letters were being delivered through access mail, where Royal Mail competitors process bulk mail. However, Ofcom said it would tighten the rules on access mail to help Royal Mail’s competition.

The regulator also has concerns that parcel deliveries, which are rising, may be subsidising letter delivery, so it will monitor this.