Ministers start search for Leighton successor at Royal Mail

Headhunters have been hired by the Government to find a successor for Royal Mail's chairman, Allan Leighton.

The move comes against a backdrop of continuing disagreement between Mr Leighton and Alistair Darling, the Secretary of State for Trade and Industry, over the chairman's plans to give 20 per cent of the business to staff.

The executive search firm Egon Zehnder has been hired to find a non-executive deputy chairman to work alongside Mr Leighton, whose contract does not end until March 2008. Candidates for the post could include Philip Hampton, the chairman of J Sainsbury, and the former Marks & Spencer chairman Paul Myners.

The planned appointment has led to speculation that whoever is hired would be in a position to take over from Mr Leighton should the Government formally refuse the share scheme, prompting him to quit early.

Relations between the Government and Royal Mail have become strained as a result of the continued impasse over the share scheme which Mr Leighton has insisted is a "key part" of a £3bn rescue plan for Royal Mail.

However last night sources close to Mr Leighton said the advertisement for a deputy chairman had been placed at Royal Mail's behest and was a "negotiating ploy" to force the Government's hand and get the employee share scheme in place. One source said: "A successor will only join Royal Mail if the full package is signed up to and that includes the share scheme. If Leighton goes, it would be a disaster and if nobody came in to replace him it would be an even bigger disaster."

Mr Leighton was said to remain "100 per cent confident" that ministers would support his scheme. He has refused to implement the rescue plan - which would involve £1.3bn to sort out the Post Office branch network, £990m to modernise Royal Mail and £850m to help plug the black hole in its pension scheme - unless the Government agrees to his scheme to incentivise the business's 160,000 staff.

However, that would prove politically difficult for Mr Darling, given the furious opposition of backbench Labour MPs. Some 199 of them have signed a House of Commons motion opposing the plan while the Trade and Industry Select Committee this week said Royal Mail had "failed to make a compelling case" for the share scheme.

The plan is also strongly opposed by the Communication Workers Union which fears it could pave the way for the privatisation of the Royal Mail.

However, the impasse itself is creating considerable difficulties. Trustees of the Royal Mail's huge pension fund have been put in an awkward position because they need to give the Pensions Regulator assurances that steps are being taken to address the deficit.

The postal regulator Postcomm is also in a difficult position because it allowed Royal Mail to raise prices this year only on the understanding that the extra revenue would help to pay for modernisation. That is being stalled by the failure to sign off the rescue plan.

A DTI spokeswoman said: "There are obviously a lot of issues facing the Royal Mail board. We are seeking to strengthen the board to deal with that. This is a big, important business and having a strong board is essential.

"Were Allan Leighton to leave, there would be a proper appointment process."