SPICe last year estimated the additional cost to Scotland of parcel delivery surcharges relative to the rest of the UK. This was £36.3 million and was widely covered in the media (for example: BBC, Scotsman, The Press and Journal, The Scottish Sun). SPICe recently updated this calculation for 2018, and our new estimate found that the additional cost to Scotland of parcel delivery surcharges increased to £38 million. In this blog, we present a summary of the data sources and assumptions used to create this costing.
Data sources and assumptions
Here is an outline of some of the key elements used in the costing.
- Population count of Scottish postcode areas impacted by delivery surcharges. The impacted postcode areas were sourced from a 2017 study for Citizens Advice Scotland called Parcel Delivery Operators Views on Rural Parcel Delivery in Scotland. The highlighted postcode areas were then matched to National Records of Scotland population data by postcode. From this it can be estimated that 515,500 people live in areas that commonly carry a delivery surcharge and a further 432,600 people live in areas where only some parcel carriers make a surcharge.
- Delivery charges by area and parcel weight. The 2017 study Postcode Penalty: Delivering Solutions by Citizen Advice Scotland & Consumer Futures Unit estimated a range of delivery charges by area throughout the UK and by parcel weights. Using these delivery charges, it was possible to calculate the additional cost to Scottish adult residents impacted by delivery surcharges by parcel weight as illustrated in Table 1.
Table 1: Delivery charges by area and parcel weight
Averages charges to areas of Scotland impacted by delivery surcharges |
Averages charges to Rest of UK |
Additional charge to areas of Scotland impacted by delivery surcharges |
|
Letterbox size |
£2.28 |
£2.05 |
£0.23 |
1-20kg |
£2.77 |
£2.28 |
£0.49 |
20-30kg |
£9.73 |
£4.68 |
£5.06 |
30-50kg |
£17.13 |
£6.02 |
£11.11 |
- Proportion of UK adults that shop online. Using data from the ONS Internet access – households and individuals data and Eurostat we adjusted the total population numbers to reflect those that shop online. Using these referenced sources, we estimate that 84% of adults shop online.
- Average number of parcels received each week for all UK adults. The Ofcom Communications Market report indicates that the average number of parcels received each week for all UK adults is 1.2.
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Additional cost to Scotland
Bringing the above evidence and assumptions together, it is possible to estimate that 510,238 Scottish adults are impacted by delivery surcharges (this includes adjustments for proportion that shop online and areas that are only sometimes impacted by surcharges).
The average additional annual cost per Scottish adult impacted by delivery surcharges is estimated at £74.64. Table 2 shows that the majority of the additional cost relates to 30kg+ parcels. Thus, from a sensitivity analysis perspective any small change to the proportion of 30kg+ parcels would make a big difference to the overall total additional cost.
Table 2: Average additional annual cost per Scottish adult impacted by delivery surcharges by parcel size
Parcel weight |
Average additional annual cost per Scottish adult |
Letterbox size |
£5.45 |
1-20kg |
£15.59 |
20-30kg |
£18.93 |
30-50kg |
£34.66 |
Total |
£74.64 |
Applying this average additional cost per adult to the total impacted adult population, we can estimate that the annual total additional cost to the Scottish adult population impacted by delivery surcharges is £38.1 million relative to the Rest of the UK.
Christmas period cost
The OFCOM annual monitoring update on the postal market provides information on the volume of parcels delivered by financial year quarter. This shows Q3 (Oct-Dec) 2017/18 accounted for 30% of all parcels delivered in 2017/18. Applying this proportion to the total annual delivery surcharge, it is possible to estimate the total cost over the Christmas period to the Scottish adult population impacted by delivery surcharges. This results in a total Christmas period cost of £11.4 million.
A caveat
As with any costing of this nature, we must emphasise that the estimated figures are based on a variety of information sources from a range of different studies. As such, it should be used to give a broad indication of the possible cost to Scotland, rather than a precise estimation of cost.
Alison O’Connor, Financial Scrutiny Unit, SPICe