The Royal Mail is to receive a £1.75bn package from the government to help plug its pension fund deficit and pay for modernisation.
About £900m will be in the form of a loan, which must be repaid by 2013. The other £850m comes from existing Royal Mail reserves, which it will be allowed to use to shore up a pensions deficit now totalling £5.6bn.
In addition to the pensions deficit, the Royal Mail needs money to modernise its sorting offices now that the UK postal market has been opened up to competition.
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Last year, the company’s bosses said that they would need to invest as much as £2bn to upgrade equipment if the company was to survive.
Trade and industry secretary Alistair Darling said: “This financing framework will give Royal Mail the right basis from which to take forward an ambitious modernisation programme, helping to deliver a world class service.
