ROYAL MAIL could be broken up in one of the biggest shake-ups in its 300-year history, under plans being considered by the industry regulator.

The Times has learnt that Postcomm is considering whether customers would be better served by splitting Royal Mail into two or more parts.

A break-up would separate its big mail centres and delivery activities from the Post Office branch network and other retail operations.

Postcomm is calculating the benefits of a split and aims to consult consumers, industry and Royal Mail itself in the new year.

The regulator is concerned that Royal Mail is charging rivals too much to use its infrastructure, which is hampering competition in the postal market. It also wants more transparency in Royal Mail’s functions.

The plans are being discussed as Royal Mail is braced for the opening of competition throughout the postal market in January.

A split is being urged by Royal Mail’s biggest rivals, such as UK Mail, Deutsche Post and TNT, and by Postwatch, the consumers’ group.

Breaking up the operations would also bring Royal Mail into line with other utilities, such as gas, electricity and, latterly, BT. The regulators of those industries and the competition authorities have insisted that break-ups are better for competition.

Peter Carr, chairman of Postwatch, said: “The only way there will be effective competition in postal service is if Royal Mail is separated. The access price needs to be independently assessed and Royal Mail cannot be allowed to give itself favourable terms.

“We also need separation so that the operation of the business can be seen more clearly. Royal Mail says it loses a lot of money on domestic mail, but we don’t know that.”

Mr Carr is pressing for separation as soon as possible.

Guy Buswell, managing director of UK Mail, said: “Separation is important for long-term security. We have a good relationship with Royal Mail, but (separation) would ensure that competitors get a fair deal in access to the network. This is an emerging market and it must be seen to be working properly.”

A spokesman for Postcomm said: “Separation is something we are looking at, although work is at a very early stage as yet. We have some concerns about access price.

“If Royal Mail is only allowing access to its network at a punitive rate, then competition will not develop effectively.”

Splitting up operations will be vehemently opposed by Royal Mail, which will see it as interference from the regulator.

There may also be fears that the move could damage its hopes of a partial privatisation and the introduction of external finance, although the separate divisions would remain within the overall ownership of Royal Mail.

A Royal Mail spokesman said: “We are absolutely opposed to any such idea. We can’t see how it would benefit our customers or our people. At this time, of all times, when we don’t know how the opening of competition will affect us, it seems an extraordinary decision to raise this issue.”

A proposal for a split would put Royal Mail and Postcomm on a fresh collision course. The two sides are currently at loggerheads over the regulator’s plans to curb stamp price rises.

The clash could go to the Competition Commission unless the two sides can reach agreement before the planned implementation of the price controls next spring.

A potential fragmentation of Royal Mail would be a crucial factor in the Government’s decision on the future of the organisation.

In its election manifesto, Labour pledged to review the future of Royal Mail. Although it has appointed Sir George Bain as an adviser on the issue, it has not set out the framework of a review.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax