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Last Updated: Sunday, 1 April 2007, 14:27 GMT 15:27 UK
Royal Mail wants London surcharge
Royal Mail delivery van
Making deliveries in London is more expensive, Royal Mail says.
Royal Mail wants to charge some businesses more for sending post to addresses in London or to some of the UK's more rural areas.

The proposal, which has been made to the postal regulator Postcomm, would apply to certain types of bulk mail.

Royal Mail stressed that, if approved, the change would have no impact on letters sent with stamps by individuals or firms.

If approved it would allow it to be more competitive, Royal Mail said.

A source close to the proposal told BBC News Interactive that it costs more to deliver letters in London.

This was because of the extra wages paid to postal workers and other staff based in the capital, with the congestion charge also adding to the bill, they said.

Rural areas are also more costly to service, because the distance that must be travelled between deliveries is further, the source added.

'No extra revenue'

Postcomm is this week expected to publish a consultation paper on the proposal and other requests made by Royal Mail, with a period of about three months for people to respond.

The proposed changes have absolutely nothing to do with the price of a stamp
David Simpson
Royal Mail

A Royal Mail spokesman David Simpson confirmed the application for "zonal pricing" had been made for delivery in London and "low-density" rural areas.

He was unable to confirm reports that the surcharge would be a 2.5% for the capital and 4.8% for some countryside addresses.

If the proposals did go through, they would not bring any extra revenue for the company because it also planned to make delivery cheaper to high population density areas other than London, Mr Simpson added.

"Our rivals are already doing this. Royal Mail wants to make its bulk mail prices fairer to offer a better deal to bulk mail customers so we can compete more effectively with our competition."

He added the proposed changes would apply only to "some bulk mail from some companies".

"They have absolutely nothing to do with the price of a stamp and we will continue to offer one-price-goes-anywhere for stamped mail," he said.

Stiffer competition

Bulk mail makes up about 25% of the market, and is made up of items such as advertising and bank statements.

Since the UK postal market was opened up last year to bring in greater competition, several firms have begun competing to collect, sort and deliver mail.

In the last year, one in eight items were handled by a postal firm other than Royal Mail, Mr Simpson said.

Last month, Royal Mail said it was losing six pence on each delivery, and that it hoped more flexibility in pricing on business customers would allow it to plug this gap.

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