Stamp prices to increase by nearly 40%

The cost of first and second class stamps is to rise after the regulator Ofcom granted Royal Mail greater freedom to set its own prices.

From 30 April, a first class stamp will increase by 30 per cent from 46p to 60p, and a second class stamp will increase by 39 per cent from 36p to 50p - the biggest hike in prices since 1975.

Ofcom said that it wanted to 'safeguard' both consumer prices and Royal Mail, saying that the postal service was at 'severe risk' as consumers and businesses switch to other electronic means of communication.

Royal Mail will now make decisions on the price of stamps, although prices will be regulated by a safeguard cap meaning second class stamps will not exceed 55p in the next seven years. Small parcels and large letters up to 2kg in weight will also be capped from next year.

A Government report into the increase in prices, published in early March, had focused on the impact to vulnerable customers and small and medium enterprises (SMEs) and concluded that increases were necessary as 'market uncertainty' was placing mounting pressure on Royal Mail.

Stuart McIntosh, Ofcom's director of competition, said: "Ofcom's decisions are designed to safeguard the UK's postal service, ensuring it is sustainable, affordable and high-quality, to the end of the decade and beyond."

"The measures ensure that Royal Mail's products remain affordable for vulnerable consumers and small businesses."

However, business groups have voiced concern that the hike in stamp prices will affect SMEs, with the Forum of Private Business (FPB) saying first class charges will become unaffordable for many firms who will eventually resort to using the slower second class system.

John Walker, national chairman of the Federation of Small Businesses (FSB) said: "Rapidly raising stamp prices now will be bad for business. With small businesses and consumers being hit by other rising costs, this has come in at a time when they can ill-afford it."