Royal Mail warns of price rises after £120m hit from Reeves’s tax raid

Royal Mail said it was on track to return to profit for the full year once the cost of redundancies is removed from its balance sheet.

However, bosses warned that reform to Royal Mail’s universal service obligations, which include a requirement to deliver letters six days a week, was even more necessary after the tax raid added “cost and inflexibility” to the business.

Mr Seidenberg said: “We are delivering on the changes we can control, but the cost environment is worsening just at the time when we need to invest.

“As a major employer with around 130,000 permanent employees, the changes to National Insurance will disproportionately impact our business relative to competitors. This makes universal service reform even more urgent.”

Royal Mail came under fire for its service during the festive period last year, with some people reporting that their Christmas cards did not arrive until February.

Mr Seidenberg said he was confident the company was well-prepared this year after investing in more staff and vehicles and improving productivity in areas such as sick absences.

Royal Mail will not offer extra bonuses to postal delivery staff this Christmas, though bosses said they would offer other non-monetary incentives.

The company last year offered postmen bonuses of up to £500 if they hit delivery targets. However, it missed these targets, limiting the maximum payout to £250.

Overall, IDS swung back into the black in the first half of the year, even as its European parcels business GLS saw its profit hit by economic and regulatory uncertainty.

IDS posted an operating profit of £61m, compared to a loss of £169m last year. Revenues rose by almost £500m to £6.3bn.

It comes as the group gears up for a £3.6bn takeover by Czech billionaire Daniel Kretinsky. 

The takeover has come under scrutiny from ministers as the 500-year-old postal service passes into foreign ownership for the first time.

However, Mr Kretinsky’s EP Group has made a number of legally binding undertakings to help ease concerns and ministers are now expected to approve the deal.