Small firms are facing a Christmas squeeze after Royal Mail moved to curb the volume of mail it will collect from businesses during the festive rush, a restriction traders warn could choke growth at their most profitable time of the year.
Under the change in its policies, the carrier told business customers that the daily capacity for daily collection between November and December “will be limited to a rate of 3 times the normal capacity used”. In plain terms, “collection capacity” is the volume of mail, measured in sacks, crates or parcels, which Royal Mail contractually agrees to collect from the company’s premises at a fixed daily time.
The cap sits on top of any volume limits already written into the company’s contract, and sits heavily on seasonal businesses, those that survive by increasing over the Christmas holidays rather than shipping at a steady clip throughout the year.
For most owners, the timing won’t be too bad. As readers will know from our latest stories on whether your small business is ready for Christmas, the golden quarter is when the fortunes of the year are decided.
“Christmas is make or break for many small businesses,” said Tina McKenzie, policy chair of the Federation of Small Businesses. “It’s the biggest trading time of the year, and orders are piling up as shoppers shop for gifts and businesses work hard to meet demand.
“At a time like this, the last thing firms need is to be told that collections exist.
McKenzie added that the uncertainty about the cap “piles unnecessary pressure on small businesses at the worst possible time.”
Royal Mail defended the move as normal forward planning. “The Christmas season is our busiest time of year, when volumes double,” said a spokesperson. “As part of our advanced planning, we agree on a suitable daily collection rate with our business customers. This helps us plan more efficiently and provide a reliable service. Very few customers require more than three times our collection capacity and in such cases we will discuss them individually.”
The collection limit comes just as the distribution bill grows. In May, Royal Mail increased its fuel and energy surcharge from 11 per cent to 16 per cent for domestic services, and from 8 per cent to 13 per cent for its Parcelforce Worldwide operation. The carrier blamed “increasing cost pressures beyond our control, including the ongoing situation in the Middle East and the impact on global oil and gas prices.”
It is part of a broader consolidation of network-dependent firms. Royal Mail is separately lobbying to scrap the cap limiting how much it can raise the prices of second-class stamps each year, a regulatory safeguard in place since privatization more than a decade ago that includes increases in the second class of the consumer price index. No such protection covers first-class post, and the gap has widened accordingly: a protected second-class stamp rose from 50p when it was privatized to 91p today, while a first-class stamp rose from 60p to £1.80 over the same period. It’s not the first time a carrier’s charging has drawn scrutiny from small customers, as our report on anti-fraud technology found that thousands of small firms are undercharged.
The changes come as part of a wider operational overhaul led by Daniel Kretinsky, whose takeover of parent company International Distribution Services was completed in 2022. Kretinsky, who also owns a majority stake in Sainsbury’s, is trying to revive a business that has consistently missed its key performance targets. Last year, Ofcom fined Royal Mail £21 million after its deliveries fell “well short” of first and second tier targets, with the regulator concluding that “people are not getting what they pay for when they buy a stamp”. It was the third such fine in recent years, following a £5.6 million fine in 2023 and a £10.5 million fine in 2024.
In response, Royal Mail has pledged to invest £500 million over the next five years to boost on-time delivery rates, a turnaround plan we explored in detail when the carrier set out its £500m capital and temporary workforce overhaul. The plan includes cuts to second class deliveries on Saturdays, which began in May, and a move to shift around 6,000 postal workers to full-time jobs to improve the network.
For Gordon Leatherdale, the cap is not a trivial matter but a threat to the good planning of the year. The 51-year-old is the founder of Natural & Noble, a Wiltshire-based DIY kit drinks business which launched in 2018. The company depends on the national postal service for all its direct-to-consumer sales, which make up 30 per cent of its annual revenue of around £750,000.
Leatherdale appeared on the BBC’s Dragons’ Den in March to launch the business and has enjoyed a rise in sales since then. “That’s why we decided to invest a lot of money in direct marketing to consumers this year,” he said. “We are very focused on Christmas,” he added, including the change as Royal Mail “limiting our ability to grow and fulfill orders”.
Product kits allow people to make their own spirits at home, from gin, rum, vodka and whiskey sets to cocktail kits, and are aimed squarely at gift buyers, making the ban period difficult.
“For us at this time of the year, we can only ship 20 or 30 orders a day,” he said. But during Christmas, especially from mid-November to mid-December, we send 15 to 20 times the amount, compared to [new] Royal Mail three times. “
Two neighboring businesses at Broad Lane Farm, a business park near Devizes, are also “frustrated” by the change, Leatherdale said. “We rely on Royal Mail to pick up everything we can sell. That’s the infrastructure partner you can historically rely on, unless they beat you, to deliver your orders.”
You know the cost of disruption firsthand. During the 2022 postal strikes, by his calculations, Natural & Noble lost £45,000 worth of orders, a wound the business “tolerates” and does not want to reopen.
