Royal Mail to hike stamp prices on January 1 with first and second class post affected

First and second class stamps will rise in price on January 1, Royal Mail has announced.

The cost of a first class stamp will rise by 9p to 85p, while a second class stamp will rise to 66p - up by a penny - on the same day.

It comes just nine months after the last price increase, when first class stamps rose to 76p, and second class stamps, 65p.

Royal Mail said the latest move was "necessary to help ensure the sustainability" of the universal service after a "challenging year" for the business.

The company added that it had "considered any pricing changes very carefully" owing to the coronavirus pandemic.

In March, the cost of a second class stamp jumped to 65p (PA)

It added that the Covid-19 pandemic had cost it £85million, including PPE costs, absences, overtime and bank staff.

Royal Mail said: "The reduction in letter volumes has had a significant impact on the finances of the universal service which lost £180m in the first half of the year.

"This demonstrates the need for change in the universal service. We are working tirelessly to deliver the most comprehensive service we can in difficult circumstances as the coronavirus pandemic continues to impact our operation."

Nick Landon, chief commercial officer at Royal Mail, said: "Like other companies, 2020 has been a challenging year for Royal Mail.

"Our people have worked tirelessly to keep the UK connected throughout the pandemic and associated restrictions.

Ofcom said scrapping Saturday deliveries could save the postal service up to £225million a year by 2022-23 (Getty)

Get the latest money advice, news and help straight to your inbox - sign up at mirror.co.uk/email 

"These price increases will help us continue to deliver and sustain the Universal Service in challenging circumstances."

The decision to increase prices comes amid talks to permanently axe non-urgent Saturday deliveries.

Ofcom said cutting the service could save the postal service up to £225million a year by 2022-23.

But this in itself would not be enough to make the universal service sustainable in the long term, it said.

Royal Mail has struggled to keep up with the shift in demand for more parcel deliveries from online shopping.

At present, Royal Mail's universal service obligation means it has to deliver letters for six days per week and parcels for five days.

Any change to Royal Mail's universal service obligation would need to be made by Parliament.