Last post for Royal Mail monopoly

THE Royal Mail is to be opened up to competition for the first time in its 300-year history from April.

In a ground-breaking deal which paves the way for full-blown competition and the emergence of major postal rivals, Royal Mail today signed an agreement with courier group Business Post to open up its market. The deal is the first of its kind in Europe.

From April, a Business Post subsidiary branded UK Mail is to be allowed to take big mailing customers away from the Royal Mail.

UK Mail will initially be aiming at the business market offering to handle the post of big mailing houses like mobile phone companies or financial firms.

However, Business Post sees this as just the start of a larger attack on the Royal Mail's monopoly. 'We will see how this goes,' said Business Post managing director Paul Carvell. 'Initially we are aiming for just three% of the £5bn business mail market. That will mean £150m a year in turnover for us, which will double our business.'

The competitive arrangement works by Business Post taking over the mail needs of major customers, sorting the post and then getting it to Royal Mail's main delivery centres, from where the Royal Mail's 80,000 ordinary postmen and women deliver it.

For this so-called 'final mile' delivery Business Post will be paying Royal Mail between 13p and 13.75p per letter.

The price has been a major sticking point and the agreement comes after two and half years of negotiations. The postal regulator Postcomm had previously argued that this access to the Royal Mail's delivery network should cost competitors just 11.46p per item of post, a rate which chairman Allan Leighton said would put Royal Mail out of business.

Business Post, set up by brothers Peter and Michael Kane, has been in operation for 30 years. The deal with Royal Mail is likely to increase their huge private fortune which already stands at about £170m as owners of 60% of Business Post.

Royal Mail chief executive Adam Crozier said: 'This is a very good deal for both parties and is the first of its kind. It gives us the flexibility to work with Business Post but also compete with them.'

The type of customers Business Post is targeting typically pay Royal Mail around 18p to 19p to deliver their post. Business Post will aim to undercut the Royal Mail on price and offer 'time definite' guarantees of delivering within two days. If customers want a faster service they have the option to remain with Royal Mail.