Royal Mail has said it will need to rise prices and cut costs in the face of soaring inflation.

The company warned that it sees “significant headwinds” from rising costs including wages, energy and fuel.

Royal Mail revealed that it aimed to make cost savings of £350m over the course of its current financial year in an attempt to bolster its position.

It was revealed yesterday that inflation hit its highest level in 40 years in April amid the deteriorating cost of living crisis.

The group has already hiked the cost of posting letters by an average of around 7%, and parcel prices by an average of about 4%.

The increases took the cost of a first-class stamp to 95p and a second-class stamp to 68p.

But it sees numerous threats from rising costs ahead, including the failure to agree a pay deal with the Communication Workers Union (CWU) which is opposing measures the company wants to implement as part of its transformation programme towards a parcel-focused business.

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“We are now at a crossroads,” the company said.

“We need to deliver the benefits from change more quickly to deliver sustainable growth.

“We have made significant operational change already, but this needs to translate into real efficiency savings which deliver a financial benefit next year and beyond.

“Delivery of our existing agreements and the successful transition into the next agreements, as part of the current negotiations with the CWU, will be key to future profitable growth.

“We have made a substantial pay offer to our people which will enable the change we need to remain competitive, grow and secure their jobs for the future. Our market is changing quickly, and agility in our response is key.”

Simon Thompson, Royal Mail’s chief executive, added: “As we emerge from the pandemic, the need to accelerate the transformation of our business, particularly in delivery, has become more urgent.

“Our future is as a parcels business, so we need to adapt old ways of working designed for letters and do it much more quickly to a world increasingly dominated by parcels.”

He added: “Our focus now is to work at pace with our people and our trade unions to reinvent this British icon for the next generations, so that we can give our customers what they want, grow our business sustainably and deliver long-term job security for our great team.

“We have no time to waste.”

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