Royal Mail
Ofcom says that Royal Mail has missed important targets to ensure it delivers value for money to customers in all areas (Reuters)

Royal Mail has missed some important performance targets which are set by its regulator Ofcom.

According to Ofcom's second annual report on the postal market, Royal Mail's performance for the financial year of 2012-2013 has been mixed.

The report looked at key data and trends during the financial year regarding Royal Mail's performance in four key areas.

These were, the financial performance of the service, the company's rate of efficiency improvement, the way it satisfied business customers and competition, and whether it pleased consumers.

In terms of customers and consumers, Ofcom said that the company missed a requirement to deliver 93% of all First Class letters on the day after collection. It managed 91.7%.

The company is also required to meet a 91.5% rate of delivery for next-day delivery of First Class items in almost all of the United Kingdom's geographical postcode areas.

Here it only achieved the level of 62% of deliveries within the required postcode areas.

However, it did meet the target to deliver 98.5% of Second Class letters within three days of collection.

It narrowly missed targets or exceeded targets relating to special deliveries, parcels and ensuring delivery to the correct address.

Gradually Improving Efficiency

With regard to efficiency, the report said improvement was slow.

"Royal Mail's physical productivity is gradually improving. As letter volumes are continuing to decline and parcels are increasing it is important to consider the level of effort or "workload" required to process the mail," it said.

Royal Mail's workload in 2012-13 (adjusted for working days) only reduced by 0.6% compared to an overall addressed volume decline of 7.3%. In this period Royal Mail reported an improvement in productivity of 1.7% in its mail centres and delivery offices (accounting for changes in volume and product mix).

Yet the regulator also made it clear to Royal Mail that it would continue to monitor its performance closely and should the company miss its targets in the future, it would consider opening a formal investigation.

This could result in enforcement action, including the possibility of fines.

Ofcom also said it would have to wait and see what the effect of the privatisation of the company by the government in October would mean for its future performance.