Stamp prices look set to rise yet again as Royal Mail faces £120m bill after Budget tax raid

Royal Mail has warned of more price hikes as a result of the Chancellor’s National Insurance raid.

Martin Seidenberg, head of parent company International Distribution Services (IDS), said it would need to raise prices to offset a £120million hit from measures unveiled in the Budget last month.

The 508-year-old postal service has already increased the cost of a first-class stamp three times in a year, from £1.10 to £1.65.

Seidenberg said the rise in National Insurance – effectively a tax on jobs – would hit hard because it employs around 130,000 staff.

‘The cost environment is worsening just at the time when we need to invest,’ he said. ‘As a major employer, the changes to National Insurance will disproportionately impact our business relative to competitors.’

He added that the company was considering ‘all possible measures’, including more automation in sorting offices, and refused to rule out job cuts. 

‘It is too early to say what we will do,’ he said. ‘They will be about pricing, cost efficiencies and other ways we can move forward. Anything that would impact our people would be last resort.’

That provoked a rebuke from the Communication Workers Union (CWU), which represents around 100,000 Royal Mail staff.

The union said IDS was trying to ‘present Royal Mail as a basket case’ and ‘create a false narrative’ as an excuse to reduce staff numbers.

The clash comes at a critical time for Royal Mail, which faces an uncertain future after a takeover swoop this year from Czech tycoon Daniel Kretinsky. The energy baron, nicknamed the ‘Czech Sphinx’, controls nearly 28 per cent of IDS through his vehicle Vesa Equity.

If a £3.6billion offer is approved by the Government, Royal Mail will fall under foreign ownership for the first time since it was established by Henry VIII in 1516.

Royal Mail reported a loss of £67million for the six months to September, a substantial improvement from the £319million loss in the same period last year.

IDS, which also owns profitable international delivery network GLS, reported an overall half-year profit of £61million, swinging from a £169million loss in 2023. 

Royal Mail was brought to its knees during a series of strikes in 2022 and 2023, which caused severe disruption to deliveries and left the company haemorrhaging money.

While he expected Royal Mail to turn a profit for the full year, Seidenberg said price rises were being considered across the board, including parcels and business mail, to offset the massive tax increase announced in the Budget.

He added that changes to Royal Mail’s universal service obligation were now ‘even more urgent’. The legal obligation requires Royal Mail to deliver letters across the UK six days a week at a single price.

But the company has pushed for reform, arguing that a sharp decline in posted letters means the service is no longer fit for purpose and is costing it millions of pounds per day.

Talk of price increases also threatens to intensify criticism of Royal Mail’s already high postage costs, with reports this week showing that it would be cheaper to fly to Europe and post Christmas cards to the UK from other countries rather than by domestic first-class mail.

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