Royal Mail deliveries under threat

Royal Mail deliveries could be affected by ongoing uncertainty.

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By :  ,  Financial Analyst

Royal Mail has seen its shares slide during trading in London today (November 19th), amid news that rival delivery firms are posing a threat to its government-mandated Universal Service commitment.

The agreement guarantees the delivery of all letters throughout the UK, six days a week at one fixed price.

Royal Mail has long called on the government to reconsider the terms of the obligation, having seen its volume of business letters fall by three per cent over the last six months.

That decline was slower than previously predicted, mainly due to election pamphleting, particularly in regard to the Scottish Referendum, which was responsible for seven million campaign mailings and over five million poll cards.

However, the company also warned that hundreds of millions of pounds could be wiped off its revenues due to increased parcel delivery competition, from firms such as Amazon.

Its UK parcel delivery division saw revenues fall by one per cent, although the company's international service performed well, with revenue increasing by seven per cent to push its overall earnings to just over £4.52 billion.

It all comes amid the firm posting a fall in pre-tax profits from £233 million to £218 million for the six months to September 28th in comparison to the same period last year.

The company begun morning trading by seeing its shares sliding by just over five per cent.

Moya Greene, Royal Mail’s chief executive, told the Guardian: "The UK parcels market remains challenging. As the pre-eminent UK parcels delivery company, we are targeting a number of new, growing areas, and delivered two per cent volume growth in a competitive market. We had a better than expected performance in UK letters."

Royal Mail has already been under increased public scrutiny in recent months after it was privatised back in October 2013, amid accusations that its shares had been undervalued, causing the taxpayer to lose out by around £1 billion.

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