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Brussels, 7th March 2007

State aid: Commission endorses €460 million funding for UK Post Office Limited for 2007/8

The European Commission has authorised, under the EC Treaty’s rules on state aid, proposed funding by the UK Government to allow Post Office Limited to continue to provide public services through the network of post offices in the financial year beginning 1 April 2007. As all the requirements of the Community framework for state aid in the form of public service compensation are satisfied, the Commission considers that the aid is compatible with the EC Treaty. In particular, the compensation measures are designed not to exceed the minimum necessary for Post Office Limited to continue providing the public services entrusted to it.

EU Competition Commissioner Neelie Kroes said: “Public services are a vital part of the European economy, and the Commission recognises their importance. Aid can therefore be approved where the amount is strictly limited to what is necessary to cover the costs of public service obligations”.

Post Office Limited is a subsidiary of Royal Mail, the UK's main postal services provider which is entirely state-owned. Post Office Limited operates the network of around 14 000 post offices throughout the UK. The large majority of these are separate businesses operated under agency contracts by sub-postmasters. The network provides a range of public services on behalf of government departments and private undertakings, such as basic cash facilities, bill payment, licensing etc, as well as access to the universal postal service provided by Royal Mail. In addition, the network provides a small but growing range of commercial services including lottery tickets, foreign exchange, telephony and insurance products.

In December 2006, the UK notified its intention to extend by a further year a measure previously authorised by the Commission in 2003 (see IP/03/757), under which the losses incurred by the network of post offices in providing public services are covered by Government funds. The amount notified for the financial year beginning 1 April 2007 is £313 million (€460 million). A separate measure, providing £150 million (€220 million) per year to cover the specific costs of operating the inherently loss-making rural post office network was approved in 2006 for two years (see IP/06/225).

The present decision does not prejudge the assessment of further measures to transform the post office network, with associated funding up to 2011, which the UK authorities announced on 14 December 2006.

On 21 February 2007 the Commission announced the opening of an investigation procedure concerning funding arrangements for Royal Mail (see IP/07/226), totalling more than £2.5 billion. The measure authorised today is separate and concerns only the compensation of costs specifically incurred by Post Office Limited.

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