Thousands of postal workers across London are preparing to walk out on strike next week creating further havoc for Royal Mail which today was told by Lord Mandelson, the Business Secretary, that the proposed sale of a 30 per cent stake in the business had been shelved.

Postal workers belonging to the Communication Workers Union (CWU) will stage a three-day walkout across the capital from next Wednesday to protest over modernisation plans for Royal Mail.

Distribution workers will take action a day later, on Thursday next week, and mail centre employees will walk out the following day. The action is expected to disrupt deliveries for at least a week.

Lord Mandelson told the House of Lords that there was no prospect of finding a buyer to acquire a 30 per cent stake in Royal Mail in current market conditions.

The Business Secretary’s stance effectively shelves any reform of the Royal Mail, its funding and the handling of its ballooning pension deficit until after the next general election.

In doing this, Lord Mandelson has removed the biggest source of contention between Gordon Brown and rebellious backbench Labour MPs.

His decision eases the Prime Minister’s path towards a general election over the next ten months, including the critical period of the autumn that marks the last opportunity for his critics to try to oust him.

Lord Mandelson said: “Our market testing has shown now is not the time to sell a minority stake in Royal Mail.” He argued that plans for a partial sell-off of Royal Mail would not provide value for the taxpayer.

About 140 Labour MPs have sought to block any part-privatisation of Royal Mail, leaving the Government dependent on Conservative support to force through any sale.

Lord Mandelson has been frustrated that there has been only one firm bidder for a 30 per cent stake in Royal Mail and that all three groups that expressed interest would have paid much less than £3 billion.

He is also frustrated that the postal delivery group has been slow to implement agreed modernisation programmes.

In return for a part-sale of Royal Mail, the Government would have taken responsibility for its worsening pension deficit. The pension gap is about £3.4 billion and is expected to be revalued to an estimated £9 billion this summer.

The CWU claims that Royal Mail is cutting jobs and services without modernising the business.

A Royal Mail spokesman said: “Customers will not understand how the union can claim to support modernisation but then announce strike action to halt existing efforts to modernise Royal Mail in London.

“The CWU’s strike action can only hurt customers and drive them away, particularly in the vitally important online fulfilment and packets areas, which are crucial to securing a successful future for the business and its employees, but where large customers have a real choice to use other operators.”

Donald Brydon, Royal Mail’s chairman, said: “Whatever the Government decides to do with its shareholding, the well-understood problems of regulation and pension fund deficit will not go away. The management, for its part, is continuing to forge ahead with its modernisation plan which is unaffected by this announcement.”

Kenneth Clarke, the Shadow Business Secretary said: “This Government is in a state of paralysed indecision on every difficult issue. Peter Mandelson said recently that the Government was committed to the policy of part-privatisation and that the Royal Mail was in a crisis. He has frequently said that the status quo is not an option. He is now leaving the Royal Mail to slide into more rapid decline.

“The real reason for delay is that Peter Mandelson cannot persuade his colleagues to back the flagship Bill of his department.”

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