A groundbreaking report by London Economics, commissioned by Postwatch, values the benefits to Consignia of providing a universal postal service at up to £480 million.
The Regulator’s analysis of Consignia’s loss making routes from providing universal services put the cost at no more than £81m. Postwatch’ s analysis shows that the potential commercial benefits are up to six times higher than potential costs.
Commenting on the findings, Gregor McGregor, Chief Executive of Postwatch says; “It is clear from this research that Consignia enjoys significant benefits from its position as a universal service provider. It demonstrates that the universal service is not a burden. In fact, it actually has a positive impact on Consignia’s ability to provide competitive services. Maintaining the monopoly is therefore neither justified nor in customers long-term interests”.
“These benefits must be taken into account when assessing the impact of competition on Consignia’s operations and universal service obligations. We conclude that Consignia should want, for sound commercial reasons, to provide a universal service – even if they were not obliged to by Parliament”.
The research analyzed four key areas of potential benefits:
1. Benefits gained from the likelihood of people buying additional products from
Consignia as a result of Consignia being a universal service provider are valued at between £4.2m and £10.8m
2.Consignia has developed its brands (Royal Mail, Post Office) over a number of years.
Being the universal service provider has had a beneficial effect on their value. These benefits were assessed in terms of brand awareness, reputation, customer loyalty and advertising costs to support the brand and have been valued at £17.6m to £42m.
3. Being a universal service provider with a complete distribution network provides economies of scale and scope, which are valued at £18.5m to £35.7m.
4. The benefits of VAT exemption applicable to Consignia have been valued at between £133m and £392m.
