The Decline of the Post Office Network in the UK

In May I posted an article that reported on the final ‘Access to Cash‘ review, along with a brief look at recommendations made by the review’s panel for ensuring the continued widespread availability of cash in the digital age.

One of the recommendations put forward was for an increased role of the Post Office network to assist in preserving Britain’s cash infrastructure. With the number of Post Office branches in decline, we will begin by examining the current state of the network before a subsequent post will look at the viability of the review’s conclusions.

Over the past twelve months the House of Commons Library has published two briefing papers (Post office numbers and The Post Office) that breakdown the size and composition of the Post Office network. As of March 2018, there were 11,547 branches throughout the UK. Compared to 2017, this represents a fall of 112 (a 1% decline). In spite of this, the Post Office remains the largest retail network in the country.

The majority of Post Offices today are known as agency branches, which are sub divided into four categories: Local, main, franchised former crowns and traditional models.

To summarise, local branches are fully integrated within retail outlets like convenience stores and petrol stations. Main branches are integrated into retail outlets, and are traditionally bigger than local offices and offer more services. Franchised former crowns are when franchise partners like WH Smith take over the running of a branch. However, it is Traditional models that are the most pervasive. This is when a sub-postmaster (a self employed agent of the Post Office) runs a branch as an independent business. Over 95% of the entire network is operated by sub-postmasters.

To break this information down into numbers, in March 2018 there were 9,768 agency branches (85% of the network). 262 were crown branches, which unlike agency offices are directly managed by Post Office Limited and offer a complete range of services. The remaining 1,517 were outreach services, which encompasses mobile post offices and services hosted in locations such as village halls.

As a network, the Post Office remains state owned with around 7,800 employees. Prior to April 2012, it was part of the Royal Mail Group before the coalition government of the time separated the two companies. This resulted in Royal Mail being privatised between 2013 and 2015 through the sale of shares.

Even before this separation occurred, the Post Office network was in decline. In March 2008, right before the financial crisis, branches totalled 13,567 in the UK. Just nine months later this had fallen by 7.6%, equating to 1,000 outlets. By March 2009, the network was down to 11,952. In the space of just one year, 11.9% of post offices had closed down.

To put these figures into context, in 1982 the number of functioning Post Offices was 22,400. The eighties and nineties – under both Conservative and Labour administrations – saw a gradual decline in branches, which accelerated further into the new millennium.

All told, in thirty seven years the network has shrunk by 48%.

If we travel back thirteen years to 2006, the Post Office announced losses of over £100 million. This triggered plans to cut the £150 million a year subsidy used for financing the network, and also the closure of 2,500 local branches. A year later in 2007 came a £1.7 billion subsidy to be used across the whole network, which at this point still included the Royal Mail.

Between 2008 and 2010, a review was undertaken of the postal service, which determined that both the Royal Mail and the Post Office were in financial peril. The recommendation of separating the two kick started the Postal Services Act 2011, and by 2012 they had become separate organisations.

Whilst in government, the Conservative / Liberal Democrat coalition published a paper called, ‘Securing the Post Office Network in the Digital Age. It was stated that unlike Royal Mail, the Post Office was not for sale and there would be no programme for branch closures.

Whilst the Post Office remains under government control, the franchising of it is steadily being extended to the private sector. In 2016 a ten year agreement with WH Smith was revealed, with Post Office branches relocating to the retailer’s stores. At the time 107 offices could be found inside a WH Smith. A further 61 were planned by April 2017.

In 2018, a new deal was struck with WH Smith. Around 41 crown branches (those directly managed by Post Office Limited) planned to relocate in 2019.

Prior to the inclusion of WH Smith within the network, a new set of modernisation plans in 2010 dubbed the ‘Network Transformation Programme‘ came into existence. The initial investment for this programme came to £1.34 billion, with a further £640 million invested in 2013 lasting up to 2018.

Funding for the Post Office network originates in two forms. Operating costs for the Post Office come via the network subsidy. Then there are the Government Capital Grants, used to cover the cost of modernising the network.

The network subsidy in 2009/10 amounted to £150 million, and by 2012/13 had increased to £210 million. By 2018/19, however, this had fallen to £60 million. A further injection of £370 million was announced to begin in April 2018, lasting until March 2021. £210 million of this was for continued modernisation of the network, with the remaining £160 million used as a network subsidy payment to ‘protect very rural branches‘.

As it stands, there are no plans to replace the loss of the subsidy in 2021. As the briefing papers comment on, without a ‘residual level of subsidy‘ for non profitable branches in remote rural areas, these specific offices will be forced to close.

But the reduction in Post Offices would not stop there. The network itself would not have the finances to continue in its current guise. Recent reports in the news demonstrated how up to 3,000 community branches would be at risk of closure, with the majority of these in rural areas.

There are currently more rural Post Office branches operating than those found in towns and cities. According to the latest set of figures, 6,110 (53% of the network) are in rural areas, with the remaining 5,437 in urban areas. In both locations, the number of branches are falling. Between March 2017 and March 2018, 75 rural branches closed along with 37 urban.

Unsurprisingly, the government’s line is that since the ‘Network Transformation Programme‘ began, the Post Office has once again become profitable. The financial year of 2016/17 saw the first reported profit in sixteen years at £13 million. A year later profits had risen to £35 million. It must be pointed out, though, that profits do not include the network subsidy or investment funding.

Elsewhere, revenues came to £1 billion in 2017/18. This was a fall of £6 million on the year before. The government attributed the decline in a reduction of the network subsidy by £10 million. Over the last five years, revenues in government services have fallen by 39.6%, and in mails and retail by 7.3%. Financial services have also seen declines of 23%.

When digesting the numerous facts and figures behind the Post Office, it is easy to misplace the human impact of what is occurring. Whereas the Post Office has been returning a profit, it is a different story for the over 8,000 sub-postmasters who keep the network functioning day to day. As we already discovered, more than 95% of the network is run by sub-postmasters.

In 2017/18, sub-postmaster income stood at £371 million – a fall of £17 million on the previous year. Last month the union representing the UK’s sub-postmasters (the National Federation of Sub-Postmasters) warned that the Post Office network was now ‘beyond tipping point, with its future viability threatened without government intervention.

According to a survey of sub-postmasters undertaken by the NFSP, 22% of them are planning to either close or downsize their post offices in the next twelve months. Should this happen it would put at risk 2,500 branches.

To illustrate the stress faced by sub-postmasters, revenue received from providing government services was £576 million in 2004/5. In 2017/18, this had dropped to £99 million. Along with depleted resources comes another stark statistic – when all expenditure for keeping a Post Office functioning is taken into account, three in four sub-postmasters currently earn below the national minimum wage.

The pressure does not end there. Because of the unyielding drive to fully digitise the economy, it has meant traditional over the counter services are now being carried out over the internet. An example of this was shared in a recent FT article. Satish Karia, who owns the Chatteris Post Office branch in Cambridgeshire, used to generate over £1000 a month in road tax payments. Ever since windscreen discs were abolished in favour of a new electronic system, £1000 has dropped to £70.

Then there is the exponential rise in bank branch closures (over 750 in 2018 alone), which has meant sub-postmasters now assuming more responsibility for satisfying public demand for banking services. This comes at a time when Post Offices are more at risk than ever before. As mentioned, we will examine in greater detail the relevance of cash in a follow up article.

How long is it before the viability of the Post Office as a publicly owned company is called into question? With the political arena consumed by Brexit, little to no consideration is being given to the perilous predicament of what is a 360 year old institution. Rural communities, those which are set adrift from major towns and cities, stand to lose the most out of the Post Office’s demise. And within those communities exist vulnerable people – the disabled, the elderly – people who do not all have access to the internet and would stand to be excluded from financial services should they lose their local branch.

Without the presence of a Post Office, it is no exaggeration to say that some within rural communities would have no definable way of conducting their basic monetary needs. The trend of bank branches closures is one that is in real danger of taking route within the Post Office network.

3 comments

  1. @ el pelusa – it is a reference work that also exemplifies the changes occuring. Unless you understood the traditional role of the post office in UK the depth of meaning contained in the post is not going to be fully noted.

    I don’t have much to add, except that the article stands true and that the post office network is also a backup system of organisation that should be kept in place and funcioning.

    Like

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