Royal Mail's 'one price goes anywhere' postal service losing money for the first time since the Penny Black 160 years ago

The "universal" Royal Mail service, which delivers letters anywhere in the country for one price, has made a loss for the first time in 160 years. Chief executive Adam Crozier said that without urgent help, the service will struggle to survive.

The company's latest results, published yesterday, show the service, which he called "a vital bedrock" and "part of the fabric of our society", lost around £100million last year.

Two years ago, it made profits of more than £50million, but in January 2006 Royal Mail was opened up to competition.

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Royal Mail said their universal service lost around £100 million last year

Since then its rivals have creamed off much of the profitable business post sector which used to subsidise the "stamped" post from domestic and small business customers. Royal Mail is now losing about 6p on every first or second-class letter.

In an emotional plea, Mr Crozier said yesterday that the universal service is under threat as never before.

He said: "The question begging an answer is how to preserve and nurture the universal service when the only business with a commitment to delivering it – Royal Mail Letters – is now loss-making."

The warning echoes a report commissioned by the Government published earlier this week, which said the universal service is under "substantial threat". It said: "We have come to the conclusion, based on evidence submitted so far, that the status quo is not tenable."

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In an attack on the postal regulator Postcomm, Mr Crozier said part of the answer to protecting Royal Mail must involve less regulation.

He said: "We are very clear that the answer, in part at least, has got to involve regulation reduced to a minimum so that Royal Mail has the freedom to compete fully in both the postal and wider communications market."

The cost of the universal service is enormous for Royal Mail, which made an overall pre-tax loss of £77million in the year to March 30.

It is not just the remote rural addresses that are expensive for delivery. Many large properties, particularly in the South, have long drives which eat up petrol and time. In London, it is costly to deliver because postmen's pay is higher in the capital than elsewhere.

Royal Mail chief executive Adam Crozier described the universal service as 'a huge asset'

Liberal Democrat business spokesman Sarah Teather said: "The Government has allowed this great British business to fall apart at the seams. Royal Mail can be turned around, but only if it is given the freedom to innovate and attract new customers."

Billy Hayes, general secretary of the Communication Workers' Union, said: "It is crunch time for universal postal services. The company's financial results show how unfair competition is undermining the ability to provide a universal postal service.

"Everybody agrees the status quo is not sustainable. Unless the current arrangements in the postal market are changed for the better, the public will lose a valuable and irreplaceable postal service."

Any changes to the service could hit small businesses who rely on it but do not send enough mail to benefit from using Royal Mail's rivals.

Overall, Royal Mail's results show it is handling around 80million letters a day, three million fewer than last year, with many Britons switching to emails or text messages.

Radical changes to its pension arrangements, which include axeing its gold-plated final salary scheme, were introduced last month in a desperate bid to cut costs.

It has a pension black hole of £2.9billion despite ploughing more than £800million into the fund last year. Customers are increasingly choosing to use second-class stamps rather than first-class.

Royal Mail said there was a growing trend for buying the cheaper stamps, which it calls "downtrading".

A second class stamp costs 27p, which is 9p less than a 36p first class stamp. Second-class mail is meant to arrive three working days and the vast majority – nearly 99 per cent – meets this target.

For customers, second-class stamps are a small way of saving money at a time of economic uncertainty. Many would rather cut their postage bill than pay for quicker delivery.

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