Royal Mail delivers record parcel numbers but fewer letters during pandemic

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Royal Mail delivered more parcels than ever during the Christmas quarter of the year amid lockdowns across the UK, but the company apologised for disruptions to service that it blamed on Covid-19 absences.

The company delivered 496m parcels during the last three months of 2020, 30% higher than the same period in 2019, it said on Thursday.

Royal Mail has kept on 10,000 out of the 33,000 seasonal workers who joined for the Christmas peak to deal with increased traffic during the latest lockdowns.

The national lockdowns in January meant revenue growth for the year to the end of March will be significantly higher than the £580m previously forecast, Royal Mail said. Operating profits for the same period are expected to be over £500m.

Shares in Royal Mail had gained 5% by Thursday afternoon. Gerald Khoo, an analyst at the broker Liberum, said the company’s “period of strength” was “set to continue, with no immediate end in sight for lockdown restrictions”.

Royal Mail has been forced to contend with a rapid and fundamental shift from delivering letters for people and businesses to delivering more packages as online shopping booms. The closure of non-essential shops during the UK’s national lockdowns has prompted more people than ever to order online.

That shift, a key challenge faced by Simon Thompson, the new chief executive appointed last month, was evident in its latest trading update, with letter volumes down by 14% but parcel numbers up by 30%. On its busiest day in the last quarter the company delivered 11.7m parcels, a third more than the busiest day during the first national lockdown in 2020.

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The company is undergoing costly changes to adjust to the shift. However, the boom in parcel deliveries more than made up for the lost letter revenues. Overall revenues were up by a fifth in the final quarter of 2020.

Royal Mail blamed social distancing requirements in sorting offices and staff absences due to mandatory self-isolation for disruption to services in areas including Daventry, Barnsley, Leeds, Margate and large parts of London.

Keith Williams, the chair of Royal Mail’s board, said it had faced “unprecedented parcel volumes” during “challenging circumstances”.

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“Given these record volumes, we recognise that at times our service during the period was not always as we would have wished,” he said. The company had made “encouraging progress” in rectifying those problems, he said.

As well as the extra workers, Royal Mail kept on 6,000 extra vehicles and four temporary parcel sorting centres.

The company is also working to bring in changes agreed before Christmas with the main union representing its workers, the Communication Workers Union. The deal, which included a pay rise, was agreed after the departure of Rico Back, the previous chief executive under whom worker relations had deteriorated. Back resigned abruptly in May.