Cost-Benefit Analysis of Rural Post Office Branches

The Situation

In 2003, NERA was commissioned by the Postal Services Commission (Postcomm), the independent postal regulator, to assess the costs and benefits of rural Post Offices in the UK. The study was designed to feed into the advice and recommendations Postcomm were providing to the Department for Trade and Industry on the strategy the Government needed to take to ensure access to rural Post Offices from 2006.

NERA's Role

NERA conducted a cost-benefit study of rural Post Office branches. The key objectives of the study were to 1) Quantify the value of Post Office branches and services to local rural communities including vulnerable groups; and 2) Quantify the cost of delivering Post Office services. NERA found that almost all rural branches cost more to run than the revenue they produce, and that relatively few branches are profitable. However, social benefits to local residents exceed costs for 80 per cent of rural branches.

The Result

NERA's work contributed to Postcomm's policy development for rural post offices and informed their recommendations to government. In September 2004 the Secretary of State announced that the Government would roll forward funding for the rural network from 2006 to 2008 and after a full report on pilot activity they will consider if the "no avoidable closure requirement" on Post Office Ltd. needs to continue after 2006.