Consumer groups reacted angrily yesterday after the postal group Consignia confirmed plans to close up to 3,000 urban post offices as part of a cost-cutting drive.
The closures, equivalent to a third of the urban network, will be accompanied by a £200m government-funded compensation package.
Alan Barrie, executive director of Post Office Ltd, defended the cutbacks on the grounds that the 17,500-strong branch network was losing £100m a year and would face even greater difficulties when the payment of social security benefits is switched from post offices direct into bank accounts next year. The move will reduce revenues by 40 per cent or £400m.
"In many towns and cities there are simply too many Post Office branches for the number of customers," he added. "Profitability is reducing to the point where it is increasingly difficult for sub-postmasters to run viable businesses, let alone invest for the future."
The closure plan was spelt out in a letter to all 17,500 branches from the Post Office's director for "network re-invention".
Mr Barrie pledged that even after the closures, 95 per cent of people in urban areas would still live within a mile of their nearest branch.
However, Peter Carr, chairman of the consumer watchdog Postwatch, said: "Access to post offices is vital to large parts of the population, notably the elderly and the disadvantaged. Closures on the scale suggested will mean disruption and distress to many of these people."
The average compensation for each sub-postmaster who decides to close will be worth about £68,000 or 28 months income. Alternatively, they can opt to remain in business and receive a government grant worth £5,000 to £10,000 to invest in improved facilities.
The closures are due to be phased in over the next three years and will reduce the size of the overall network to about 14,500 branches.
Rural post offices, of which there are about 9,000 at present, are not affected and are the subject of a separate £5m support scheme.
Consignia is currently losing £1.5m a day and faces an imminent threat to one third of its Royal Mail monopoly as the industry regulator Postcomm introduces competition for bulk mail users. In response, the group is cutting 30,000 jobs in a bid to save up to £1.2bn a year.
The National Federation of Sub-Postmasters, which has been negotiating the closure programme with Consignia for several months, said: "We currently have a network that's been starved of investment for decades. To do nothing is not an option."
In 2000-01 a total of 547 branches closed but in the first nine months of the financial year just ended the number fell to 192.