Profits at Royal Mail doubled to £321 million last year despite a continued fall in the number of letters being posted, in results likely to be seized on by unions attempting to stop Government plans to sell a stake in the group.

Last year’s total compares with £162 million for the financial year 2007-08. However, that year was hit by some of the worst industrial action for two decades which the organisation said cost it dearly.

Unions are likely to argue the figures show that Royal Mail does not need to sell a stake, while the Government, which is mounting the controversial sale, will hope that the profits make its case stronger in negotiations with the two remaining bidders.

Recently, Deutsche Post pulled out of the race to buy a 30 per cent stake in Royal Mail, leaving two bidders - TNT, with which the Government started talks several months ago, and CVC Capital, which is working with the Belgian post office.

The Government is facing rebellion from more than 150 Labour MPs over the sale and will have to call on the Conservatives to support its legislation.

The average daily tally of letters and parcels is now 75 million items, a fall of nine million over the past three years. The drop is predominantly due to the growth of electronic communication, particularly the internet. Although Royal Mail is in competition with rival services, it still has an obligation to cover the last mile of any delivery for them.

Royal Mail repeated that all its four core businesses are in profit for the first time in 20 years, which it announced in January when publishing nine-month figures.

The pension fund deficit has more than doubled since last year to £6.8 billion in accounting terms. The actuarial valuation is expected to be much worse when it revalued later this year.

Royal Mail’s cashflow is negative, with an outflow in the year of £373m. The company blamed modernisation and its payment of about £800 million a year into the pension fund.

The postal group has been criticised by Lord Mandelson, the Business Secretary, and by MPs on the Business Select Committee over the speed at which it is modernising. It has spent only half the £1.2 billion given to it by the Government two years ago for investment and will not have spent the total until 2011.

Mail volumes fell 5.5 per cent last year and are predicted to decline by a further 10 per cent in the current financial year because of the switch to electronic media and because of the economic slowdown.

Adam Crozier, chief executive of Royal Mail, said: “Our people have delivered strong financial results and high quality customer service across all our businesses in the face of extremely challenging trading conditions.

"All four of the group’s businesses are now in full-year profit for the first time in two decades, including Royal Mail Letters, which made a small profit compared with the previous year’s loss, despite accelerating mail volume losses, which mean the business is now handling 10 per cent fewer letters and packets than a year ago.”

Royal Mail is facing a possible showdown with unions over its implementation of a pay freeze for all 181,000 workers.

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