Thousands of postal workers facing the sack

Postal group Consignia unveiled drastic cuts of more than £1 billion to fight a financial crisis. The plan to reduce costs by 15 per cent could lead to thousands of job losses over the next 18 months, with one in 10 staff being laid off in some departments.

Consignia said it was considering scrapping or delaying major investment projects as part of the plan to cut its cost base.

In an internal briefing to managers, the organisation said it was facing a financial crisis.

"We are an £8 billion business which is moving into loss. Our costs are running ahead of income and unless we take drastic action, we will fail as a business, not just this year but in following years.

"That's why the executive board has decided that we must take steps to cut out costs over the next 18 months to create a much leaner business.

"The levels of inefficiency in the business, despite our best efforts to control them, are crippling us.

"We are now living beyond our means and we need to get a grip of this now."

Consignia stressed that no decisions have been taken on redundancies because the organisation wants to achieve the cuts with the cooperation of unions.

But the Communication Workers Union reacted with anger to the announcement and warned it could take industrial action if there are compulsory job losses.

Deputy general secretary John Keggie accused Consignia of taking "panic measures" and unfairly blaming efficiency levels.

"The Department of Trade and Industry must ask just how a business that was profitable for 20 years before commercial freedom was granted is now in such a financial mess

"This madcap plan to slice off the industry is ill–conceived and destructive. We are demanding immediate talks with Consignia over these plans, which are completely unacceptable."

Consignia said a number of areas were being examined for savings including postal deliveries, the parcels business, outsourcing and ceasing or delaying major projects.

The savings will be used for investment, said a Consignia spokesman, adding: "We want to invest in our products and the way in which we deliver them. We want to invest in our people and we want to ensure our profitability is at a level our shareholder – the Government – has every right to expect."

Consignia said warning signs were clear from its last set of annual results showing an operating loss before exceptional items of £3 million.

Postal watchdog group Postwatch said it did not accept that increased competition had caused the "collapse in profits".

Chairman Peter Carr said: "Competition has hardly started to establish itself. Consignia's management should take a hard look at its past investment decisions – here and abroad – before offering excuses."

A spokeswoman for the Department of Trade and Industry said: "The Postal Services Act clearly sets out the requirement for daily deliveries to every household in the UK and daily collections from post boxes and registered post services.

"The Act also requires that these services should be provided at affordable prices which are uniform throughout the UK.

"Consignia's licence to operate requires the company to maintain a universal service at a uniform price."