Royal Mail given funding boost

Alistair Darling has detailed a £1.75bn funding package to help Royal Mail deliver "an ambitious modernisation programme".

The new deal will comprise a £900m loan made at commercial rates and freedom over £850m currently on Royal Mail's accounts but which it was previously unable to use freely.

Speaking on Thursday, the trade and industry secretary 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."

The news came as Royal Mail published its annual accounts, revealing that profits rose 17 per cent to £355m over the last year.

The £850m will be transferred into a pension escrow account that could be used by the pension trustees if the the company ever failed.

And the £900m will come as an extension of existing debt facilities and will be available for use by Royal Mail on commercial terms.

It was also announced that expenditure on the Post Office will be met by the government rather than from Royal Mail reserves.

"Giving Royal Mail the freedom to use its financial resources to invest for the future puts the company in a stronger position to successfully compete in the marketplace and also deliver a financial return for the taxpayer," said Darling.