Royal Mail first-class letters to rise from 46p to 60p.
The price rise, which comes into force on 30 April, marks the biggest annual increase in the cost of stamps in percentage terms since 1975. It was accompanied by a hike in the cost of second-class stamps from 36p to 50p.
The increases were announced yesterday almost immediately after Ofcom, the postal regulator, decided to remove its cap on what Royal Mail is entitled to charge for first-class stamps.
The price of second-class stamps will still be subjected to Ofcom regulation with the rise to 50p remaining 5p below the maximum price permitted by the regulator. Over the next seven years, the price of second-class stamps will be capped at 55p, but this could rise with inflation.
The Royal Mail has lost almost £1 billion over the past four financial years.
In 1975, the cost of first and second-class stamps rose by 55 per cent, while there was a 66 per cent increase in 1940. Yesterday’s announcement marked a 30 per cent rise for first-class stamps and a 36 per cent increase for second-class.
Royal Mail has seen postal volumes fall by 25 per cent since 2006 as electronic and text messaging volumes have risen. They are expected to continue to fall by between 25 to 40 per cent in the next five years.
Last year, Royal Mail’s letters business, from which it gets more than two-thirds of its revenue, lost £120 million. The move to allow the Royal Mail to set its prices was seen as another significant step on the road to privatisation of the organisation.
This weekend, the Royal Mail will go through a series of changes that pave the way for a flotation. Royal Mail will formally separate from the Post Office network, which will stay in government ownership. Its £9.5bn pension deficit will be handed over to the state. Those moves, along with yesterday’s price deregulation, are key steps on the way to flotation.