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Business / Reduced government subsidy behind proposed post office move, says Freefield owner

Brian Smith adds that the Freefield Post Office loses around £6,000 a year as financial package ‘just isn’t enough to cover the costs’

The entrance to the Toll Clock Shopping Centre, which houses Freefield Post Office. Photo: Shetland News

THE OWNER of the Freefield Post Office in Lerwick says the driving force behind Post Office Ltd’s plans to move services out of its Commercial Street premises is a need to cut costs as the company struggles with reduced government subsidy.

Brian Smith, who runs the Freefield office as a franchise within Clocktower Cards, also revealed that he loses around £6,000 a year on providing postal services as the financial package from Post Office Ltd “just isn’t enough to cover the costs”.

Increased footfall into the shop, however, is thought to cover the loss.

It was announced last week that Post Office is proposing to move services from its Commercial Street premises to newsagents Conochies in a bid to secure its “long-term viability”.

The post office on Commercial Street. Photo: Shetland News

The proposal, which is open to consultation, faced the wrath of many locals who were concerned over issues like space, access and parking.

Smith has been involved in running Lerwick’s only other post office, ensconced within the Toll Clock Shopping Centre, for the last 14 years.

He believes that a lot of people are worried about the Commercial Street change for “panicky reasons”.

“There’s going to be very little difference for anybody,” Smith said.

“You can still go and withdraw your cash, you can withdraw your benefits. There’s going to be a post office counter there, and it’s got longer hours. You can still post your parcels. It will still leave the island the same day if you get it posted before lunchtime.”

The subsidy grant provided by the UK Government to Post Office Ltd for running services has fallen from £210 million in 2012/13 to just £50 million, while there is no plan in place for 2021/22.

After making continued losses the company reported a modest profit of £13 million in 2016/17, which rose to £35 million the following year – highlighting the continued importance of the subsidy.

Only two per cent of offices are directly managed by Post Office Ltd, with Commercial Street one of them, and Smith said the cost of running these branches instead of franchised outlets – where services are located within another business – is “huge”.

But he said due to the level of income received from Post Office Ltd, Freefield actually makes a loss – despite apparently handling more mail at the moment than Commercial Street.

“When you’re a franchised branch you get paid purely on a transactional basis,” Smith explained.

“Freefield Post Office loses me money. So for me to run the post office from my current place of business, I’m losing probably around £6,000 a year. That’s how much it costs me to have a post office there.

“It’s a lot of work for me as well, and there’s a lot of legal hoops to jump through and a lot of legislation. On a transactional basis, the amount of money the Post Office gives in their renumeration package just isn’t enough to cover the costs.”

Smith is willing to take this loss in the view that the increased footfall tends to mean more sales in Clocktower Cards.

“The amount of people that come in for the post office increases the footfall for the shopping centre,” he said.

“I could potentially look to close down the Post Office. That would give me a bigger floor space so I could put more stock in there, but if there was no Post Office there certain customers would go to a different place, for example Conochies, which is now looking to have a post office. And they would buy their greetings cards and stationary from there.

“It’s that thought that keeps running through my mind. It probably pays itself off, but I’m not willing to take the gamble that it doesn’t.”

Smith added that he continues to “work hard” to provide disabled access in Freefield, but “I would have to pay for it myself out of my own pocket”.

The National Federation of SubPostmasters, which represents people who run post offices within their business, said earlier this year in a submission to parliament that “subpostmasters are resigning in high numbers because it is increasingly difficult to make a decent living”.

It also expressed grave concern over what will happen to the Post Office network in 2021 when the UK Government’s subsidy agreement ends.

MP Kelly Tolhurst, whose responsibilities include postal affairs, was reported in June as saying “if subsidy is needed, we will lobby for one”.

Smith said he was concerned that if the government subsidy did fall through, obligations for access criteria – such as 99 per cent of the UK population being within three miles of a post office – could be no more.

“There’s a very, very good chance that in two years time, Post Office Ltd will have a cull of the network,” he warned.

“That’s my guessed opinion. They say keep on saying that they are not wanting to do that and they want to invest in community branches, but there may come a time in a few years where the branches that have a very small amount of transactions disappear.”