The parcel margin squeeze: volumes up 7.1%, real unit revenue down 7.3%, and why the P&L hides it

In the financial year to March 2025, total measured parcel volumes in the UK rose 7.1% to 4.2 billion items.

Over the same period, real average unit revenue per parcel fell 7.3%, from £3.38 to £3.13.

Both figures come from the same Ofcom report. Neither is contested. The market moved more parcels than it had ever moved and earned less, in real terms, on every one of them.

Most operators felt that during the year. Very few saw it written down, because the number that describes it does not appear anywhere in their own accounts.

The number that shows, and the number that does not

Measured parcel revenues across the market rose 1.6% in nominal terms.

The same revenues fell 0.8% in real terms, to £13.2bn.

Both statements describe the same year. The first is what lands in a set of accounts. The second is what the money was actually worth. The gap between them is inflation, and inflation does not appear as a line item, so it does not get reviewed.

That is the whole reason this squeeze runs quietly. An operator closing the year looks at turnover, sees it up on last year, and concludes the business grew. Volumes were up. Revenue was up. Nothing in the management pack says otherwise.

What the management pack does not show is revenue per unit, in real terms, against the prior year. That is the line where the erosion lives, and almost nobody runs it, because it needs an inflation adjustment and a per-consignment denominator that most reporting is not set up to produce.

So the year closes, the numbers look like growth, and the feeling in the business is that everything got harder for no visible reason.

Where it bites, and where it does not

This does not land evenly.

If you own the network, the depots and the fleet, volume growth absorbs a good deal of it. More items across the same fixed cost base improves cost per drop. A 7.1% volume increase against a 7.3% real unit revenue fall is close to a wash, and scale operators have levers on both sides of it.

If your income is a slice of the price rather than a slice of the volume, none of that applies.

Parcel resellers, brokers, franchise partners and fulfilment operators reselling carrier rates all earn a spread. You buy at a contracted rate and you sell at a rate above it, and what you keep is the difference. You do not own the depots, so volume growth gives you no unit cost benefit worth speaking of. Your economics are the spread, and nothing else.

When the underlying market rate compresses, the spread compresses with it.

The awkward part is that it compresses across the whole book at once. This is not one account renegotiating hard. It is the level the market prices at moving underneath every account you have, including the ones you never touched this year and assumed were stable.

The arithmetic

Take the 7.3% real fall in unit revenue and work out what it takes to stand still.

To hold the same real income per parcel after a 7.3% decline, you need:

About 7.9% more volume, simply to earn what you earned last year in real terms.

That figure is arithmetic derived from the Ofcom number. It is not an Ofcom figure and it is not published anywhere. The 7.3% is theirs. The 7.9% is what follows from it.

Now put it next to the market's own growth rate. Total measured volumes grew 7.1%.

An operator who grew exactly in line with the market, which is to say an operator who had a decent year by any normal measure, came out roughly level in real terms. Slightly behind, in fact.

That is worth sitting with. The average operator ran 7.1% harder in 2024-25 and stood approximately still.

Where the extra volume has to come from

Here is the part that changes what the number means.

The obvious response to needing 8% more volume is to get it from the accounts you already have. Grow the existing book. It is cheaper, the relationships exist, and the operational work is already understood.

That does not solve it.

Existing accounts are shipping at the compressed rate too. They are inside the same market that just repriced. Adding volume to an account that is already priced at the new level adds volume at the new spread, which is the spread that created the problem. You are running more parcels through the same squeeze.

Volume from existing accounts keeps the depot busy. It does not restore the unit economics, because the unit economics are what moved.

Which leaves new accounts. Not because new business is inherently better, but because it is the only volume that can be won at a rate you set rather than a rate you inherited, and the only volume that is genuinely additive to a book already fully exposed to the compression.

So the position a lot of independent operators are in, whether or not it has been named in a board meeting, is this. New business used to be how the business grew. It is now how the business stays the same size.