The owner of Royal Mail says he cannot rule out job cuts after its £120m budget fell

The group behind Royal Mail has warned it cannot rule out job cuts or price rises given the impact of the autumn’s £120m social security budget changes.

Martin Seidenberg, chief executive of parent company International Distribution Services (IDS), said the measures in Rachel Reeves’ first budget last month would “hit us harder compared to our competitors”.

The company said a £134 million write-down related to the National Insurance increase prevented it from returning to profit in the last six months.

The company, which employs around 130,000 people in the UK, said the jump in costs meant reforms to its universal service obligations – which currently provide first class deliveries six days a week – were “more urgent”.

The Chancellor announced a £25.7 billion change to employers’ National Insurance Contributions (NICs) in the Budget that would increase the rate of tax and lower the threshold at which companies must pay.

It is the latest major company to warn that workers and customers could struggle with the impact of a rise in corporate taxes, which also coincides with a rise in the national living wage.

Mr Seidenberg said: “We see a significant burden from the increase in social security.

“We are looking at a range of measures but it is too early to say what we will do. This is about pricing, cost effectiveness and other ways we can move forward.”

Asked whether this could lead to job losses, he said it was “too early to say” but would not rule it out.

“Anything that would impact our employees would be a last resort, but we are working on it,” he added.

The boss said the company – which agreed a takeover deal earlier this year – could consider increasing automation to deal with the rising cost burden.

Mr Seidenberg said the rise in its costs “increases the need” for service reform, with the company hoping for a decision from regulator Ofcom on a review of its universal service obligations (USO) by early next year.

In September Ofcom said it was considering allowing Royal Mail to abandon Saturday deliveries for second-class letters as part of the consultation.

This came as IDS improved its profitability in the last half of the year and welcomed progress on its major transformation plan.

The company underwent a major restructuring that resulted in thousands of jobs being cut from 2022 as Royal Mail was hit by industrial action.

IDS is also awaiting approval of its proposed £3.57 billion takeover by Czech billionaire Daniel Kretinsky.

The company completed the controversial deal in May, but the move is currently under review by the government under the National Security and Investment Act.

On Thursday, IDS reported an adjusted operating profit of £61 million for the 26 weeks to September 29, compared with a loss of £169 million a year earlier.

However, taking depreciation into account, there was a loss of £87 million.

It also showed that half-year sales rose 8.2% to £6.34 billion.

This was supported by 10% growth at Royal Mail, although parcel sales were weaker than expected in the period.