I suppose that this should have struck me as strange, since an ILL implies moving the book from one library to another and back and second-class postage for a book is £2.36 each way; but maybe you could cut a factor two off that by posting books in batches, it doesn't matter to me if an ILL takes two weeks.
I went in to collect an ILL today and was told that the fee had gone up to five pounds. I pointed out that this stopped them being competitive with Amazon, and the librarian said 'but it costs us thirteen pounds to process an ILL'. Librarian salaries are about £20k per year, so with overheads this is saying that it takes most of an hour of librarian time plus postage for a second-class small packet to do a single ILL.
This isn't a problem for me; I can switch to buying the books from Amazon, and I can donate them to the library afterwards if I want the library to take them away. But I'd have used the service less if I'd known it was so expensive to provide.