Survey shows firms think postal changes will be costly

Smaller businesses think the changes to the postal system being introduced on 21 August will lead to an increase in costs. That’s the result of a survey of nearly 200 hundred firms carried out by the Forum of Private Business (FPB).

Currently, the cost of sending mail is based purely on the weight of the item being sent. When Pricing in Proportion (PIP) is introduced, the size, length and thickness of the item will all be taken into account when considering the cost of postage. The FPB, which represents around 25,000 small and medium-sized UK businesses, has surveyed firms to discover what they think of the changes. The FPB’s Research Analyst Andy Mowlah says the results show that businesses believe the changes won’t reduce their costs.

“It’s rather ironic that this new system is designed in part to cut costs yet 60% of respondents thought it would actually increase them.”

Increased costs

Christine Hogg is a director of CAMS Fire and Security in Stevenage; she said it will mean an increase in costs for them: “Royal Mail say 85% of post won’t be affected but we use an envelope that will now fall into the large letter category and I can only see it increasing costs.

“We must send around 300 of these envelopes per year which at present costs us 66 or 82p each. Under the new system that could be 94p or more each, not to mention the time and effort now needed to carry out the administration.” she added.

Twenty five per cent of respondents said they thought there would be no change in their costs while only 14% said costs would decrease.

Over a quarter of respondents said the cost of their post would increase by 15% or more. Mr Mowlah said the administrative cost of the new system would also be a burden: “60% of respondents thought the new system would mean extra time spent in administration, while 50% didn’t realise they may have to purchase a new franking machine,” he said.

The majority of firms will be able to update their systems at a minimal cost (from £30) but it appears there are examples of those who can’t. Mrs Hogg said her system would need replacing and the cost of buying a new franking system would be prohibitive: “We have no viable alternative to our current system, so we will be left with the slow and costly process of using the Royal Mail’s templates to check size. It is frustrating when we brought a franking system in to reduce costs.”

A Postcom consultation on further proposed changes that would see further costs for businesses ends on 3 August 2006. The plans aim to move accounts from paper sales orders to electronic and would see a Minimum Order Value (MOV) of £5 introduced to all Royal Mail account customers on 2 April 2007. Customers can send post under the £5 value but they will be charged a minimum of £5 per order. This will apply to both paper and electronic sales orders.

It is then planned to introduce a MOV of £20 and a handling charge of £1 per order for all Paper Sales Orders (posting cheques), from 1 October 2007. Again, customers can post under the MOV but will receive an invoice for a minimum of £20 for each paper-based order, plus a £1 charge for each paper sales order used.

The FPB’s survey found that just 8% of respondents backed these changes, with 46% opposed and another 45% unsure.