Small firms are bracing for a squeezed Christmas after Royal Mail moved to cap the volume of mail it will collect from business premises during the festive rush, a limit that traders warn could choke off growth at the most lucrative moment of their year.
Under a change to its terms, the carrier told business customers that daily collection capacity across November and December “will be limited to a maximum of 3 times the usual collection capacity used”. In plain terms, “collection capacity” is the physical volume of post, counted in sacks, cages or parcels, that Royal Mail contractually agrees to pick up from a company’s premises during its scheduled daily slot.
The cap sits on top of any volume limits already written into a firm’s contract, and it lands hardest on seasonal businesses, the ones that survive by scaling up sharply for the Christmas holidays rather than shipping at a steady clip all year round.
For many owners, the timing could hardly be worse. As readers will know from our recent coverage of whether your small business is ready for Christmas, the golden quarter is when a year’s fortunes are often decided.
“Christmas is make or break for many small firms,” said Tina McKenzie, policy chair of the Federation of Small Businesses. “It’s the biggest trading period of the year, with orders piling up as shoppers buy gifts and businesses work flat out to keep up with demand.
“At a time like this, the last thing firms need is to be told there’s a cap on collections. Many rely on Royal Mail picking up parcels from their premises because stepping away to queue at a post office simply isn’t practical when every minute counts.”
McKenzie added that the uncertainty over the limit “piles unnecessary pressure on small businesses at the worst possible moment. They need confidence that the postal service will support them through their busiest season.”
Royal Mail defended the move as routine forward planning. “The Christmas period is our busiest time of year, where volumes double,” a spokesman said. “As part of our routine peak planning, we agree appropriate daily collection volumes with our business customers. This helps us plan effectively and provide a reliable service. Very few customers require more than three times our usual collection capacity and in such cases we’ll discuss with them individually.”
The collection limit arrives just as the bill for distribution is rising. In May, Royal Mail lifted 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 “rising cost pressures outside of our control, including the ongoing situation in the Middle East and the resulting impact on global oil and fuel prices.”
It forms part of a broader tightening for firms that lean on the network. Royal Mail is separately lobbying to scrap a cap that limits how much it can raise second-class stamp prices each year, a regulatory safeguard in place since privatisation more than a decade ago that ties second-class rises to the consumer prices index. No such protection covers first-class post, and the gap has widened accordingly: the protected second-class stamp has climbed from 50p at privatisation to 91p today, while a first-class stamp has surged from 60p to £1.80 over the same stretch. It is not the first time the carrier’s charging has drawn scrutiny from smaller customers, as our reporting on anti-fraud technology found to be mischarging thousands of small firms has shown.
The changes fall under a wider operational overhaul led by Daniel Kretinsky, whose takeover of parent company International Distribution Services completed in 2022. Kretinsky, who also holds a sizeable stake in Sainsbury’s, is trying to steady a business that keeps missing its key performance targets. Last year, Ofcom fined Royal Mail £21 million after its delivery performance fell “well short” of first and second-class targets, with the regulator concluding that “people aren’t getting what they pay for when they buy a stamp”. It was the third such penalty 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 lift on-time delivery rates, a turnaround plan we examined in detail when the carrier set out its £500m investment and part-time workforce overhaul. The programme includes cuts to second-class deliveries on Saturdays, which began in May, and a move to shift roughly 6,000 part-time postal workers into full-time roles to shore up the network.
For Gordon Leatherdale, the cap is not an abstraction but a threat to a year’s careful planning. The 51-year-old is the founder of Natural & Noble, a Wiltshire-based business selling DIY drinks kits that launched in 2018. The company depends on the national postal service for all its direct-to-consumer sales, which account for 30 per cent of annual revenue of about £750,000.
Leatherdale appeared on the BBC’s Dragons’ Den in March to pitch the business and has enjoyed a sizeable sales boost since. “Therefore we decided to invest a lot in direct-to-consumer marketing this year,” he said. “We’re very Christmas-focused,” he added, framing the change as Royal Mail “putting a cap on our ability to grow and to fulfil orders”.
The brand’s kits let people create their own spirits at home, from gin, rum, vodka and whisky infusion sets to cocktail kits, and they are pitched squarely at gift-buyers, which makes the timing of the restriction especially awkward.
“For us at this time of the year, we might only send out 20 or 30 orders a day,” he said. “But at Christmas time, particularly mid-November to mid-December, we’re sending out 15 to 20 times that amount, as opposed to the [new] Royal Mail cap of three times.”
Two neighbouring businesses at Broad Lane Farm, a business park near Devizes, were equally “baffled” by the change, Leatherdale said. “We rely on Royal Mail to pretty much take everything we can sell. It is that infrastructure partner that you can historically rely on, unless they’re striking, to send your orders.”
He knows the cost of disruption first-hand. During the 2022 postal strikes, by his own calculations, Natural & Noble lost about £45,000 worth of orders, a wound the business “endured” and does not want to reopen.
