The liberalisation of the UK postal service has produced "no significant benefits" for either households or small businesses, a report has said.

That is the initial finding of an independent review of the UK postal sector commissioned by the government.

It warned there was now a threat to the Royal Mail's financial stability.

The Royal Mail's 350-year monopoly ended at the start of 2006, when other licensed operators were given the right to collect and deliver mail.

'Untenable'

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As a result, the independent panel - which will produce its full report in the summer - said the continuing "status quo is not tenable".

"The policies needed to establish a sustainable future will be the focus of our report later this year," they said.

While the initial report said homes and small firms had not gained from the increased competition, it said large companies had "seen clear benefits from liberalisation - choice, lower prices and more assurance about the quality of the mail service".

It says these large firms have benefited from the big growth in competition in the bulk mail sector - postal firms that collect, sort and transport bulk mail before handing it over to the Royal Mail for the final delivery.

Yet at the same time, the report found that the Royal Mail still had "virtually no competition" in the delivery of addressed letters over the "final mile" to letterboxes.

"Maintaining the universal service is at the heart of this review - ensuring collection from pillar boxes and post offices and delivery to all addresses," said the report.

'Stable future'

Looking towards the final report, the panel said it needed "to establish how best to create the incentives for Royal Mail to modernise its operation, providing a stable financial future".

Last year Royal Mail announced a programme of changes to pay and working practices which it said were essential to modernise the service and enable it to compete more effectively.

However this led to a strike by Royal Mail staff and a bitter dispute which, although now resolved, is estimated to have cost Royal Mail more than £200m.

The independent review panel was appointed by the Department for Business, Enterprise and Regulatory Reform.

(BBC)

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