Consignia to cull 4,000 managers and scrap second post as losses hit £1.1bn

£1.4bn cost-cutting plan; 17,000 job losses confirmed; chief executive quits; renamed Royal Mail

Consignia is poised to axe 4,000 managers' jobs in addition to the 17,000 redundancies it confirmed yesterday along with the scrapping of its much-derided name and the disappearance of the second post.

News of the cull among postal managers came as the group, which is to be renamed Royal Mail plc from the end of the year as part of a £1m rebranding, announced a £1.1bn loss ­ the biggest in its 240-year history ­ and the departure of its chief executive, John Roberts.

Postal unions warned of industrial action if Consignia attempted to force through any compulsory redundancies and consumer groups and Opposition spokesman warned of the damage that the ending of the second delivery could do to small businesses.

But Allan Leighton, Consignia's chairman, said the measures, part of a three-year, £1.4bn cost-cutting plan, were essential if the organisation was to survive. "The current position is untenable. We cannot go on as we are or we will go bust, we will run out of cash," he said.

Mr Leighton ruled out compulsory redundancies saying that Consignia would get twice the applicants for the 30,000 jobs it is shedding in total. That in itself was an "indictment" of the business and the way poor management in the past had damaged morale.

He also sought to sugar the pill of the job losses by announcing that Consignia's remaining 170,000 staff would be awarded phantom shares linked to the group's financial performance. The awards will be worth £600 to £1,000 on top of the average postman's basic pay of £12,500.

Mr Leighton said the second post was unsustainable as it accounted for 20 per cent of Royal Mail's costs but only 4 per cent of deliveries. Its disappearance will be accompanied by a later single delivery.

Most households will now receive their post some time between 9 and noon. Only addresses which receive more than 20 letter a day will get their mail before 9 am.

The recovery programme will require funding of £2.4bn. Patricia Hewitt, the Secretary of State for Trade and Industry, told the Commons that the Government had agreed to give Consignia access to £1.8bn of surplus past profits held by the Treasury and suspend dividend payments to the Exchequer for the next three years. The remaining £600m required by Consignia will be raised on the capital markets.

But the Tories pinned the blame for Consignia's predicament on New Labour. John Whittingdale, the Conservative trade and industry spokesman, said: "Over and above management and unions, ultimate responsibility for today's announcement must rest with the Government."

Peter Carr, chairman of the consumer group Postwatch, accepted the need to end the second delivery but cautioned that the timing of the new single delivery must not be decided until the results of the forthcoming trials were known.

Most of the £1.1bn loss was made up of one-off and exceptional charges linked to the restructuring. But Consignia still made an operating loss of £318m ­ £1.2m every working day.

Operating losses are expected to reach a similar amount this year and there will be an additional £500m charge to pay for the redundancies announced yesterday.

Mr Roberts, 57, will leave at the end of this year. Mr Leighton paid tribute to his chief executive and disclosed that he had asked him to stay on for a further three years. But he also criticised the current management of Consignia by saying the £1.1bn loss "didn't happen overnight". Mr Leighton added: "Unresolved issues and problems stretching back for up to a decade are reflected in these results.... Management mistakes have been made over a number of years, including a failure to resolve deep-rooted industrial relations problems."