Royal Mail in the red thanks to letters division performance

Despite revenues of £20 million last year, the poor performance of the company's UK Letters & Parcels arm meant its profit for the year was just £39 million, down from £180 million in the previous year.

With losses in this department totalling £2 million a week, the likelihood of finding a private buyer for the state-owned business has been cast into doubt.

Those working in corporate insolvency will note that a four per cent drop in mail volumes meant total revenues stood at £9.2 billion, leaving the profit margin after costs at just 0.4 per cent.

However, this was offset by a 2.4 per cent reduction in working hours and many more jobs could go as the business looks to streamline its operations further.

Profits at the Post Office shrank from £33 million to £21 million due to a slow down in traditional business, but the government has committed to a funding package of £1.34 billion over four years with the aim of propping up beleaguered branches.

There was some positive news in the announcement, with General Logistic Systems (GLS) reporting a growth in operating profits of 5.3 per cent.

Also, negative cashflow reduced from £545 million (2009-10) to £213 million thanks to a one off property and business disposal which brought in £237 million.

Moya Greene, chief executive, said: "We need to put Royal Mail and our ability to deliver the USO on a sound, stable and sustainable footing. We have a clear plan in place to deal with our difficult business environment. The plan is very challenging but we are determined to achieve.

"The next two years will be challenging. We need to reduce our costs faster than the decline in revenues from our core letters business. The pace of change in our mail centres will continue. We expect that around half of the mail centres could close by 2016/17," she added.