Privatizing Royal Mail: Will It Lead To Further Efficiency Improvements?

Background

The postal industry is changing. Many national postal operators face falling demand as consumers switch to electronic communications and as competition within the industry grows (often from firms serving only part of the market, e.g., bulk mail). These challenges threaten the sustainability of the universal postal service, as well as the financial viability of existing postal businesses.

In the UK, the Postal Services Act was passed in 2011 with the aims of securing the long-term future of Royal Mail and the Post Office, and preserving the universal service. In response to the perceived failure of the previous regulatory regime and the unsustainable financial position of Royal Mail, the Act allowed the sale of up to 90 percent of Royal Mail, and passed responsibility for economic regulation from Postcomm to Ofcom, which has put in place a new regulatory framework (see box below). The UK government launched an Initial Public Offering in October 2013,