Royal Mail has warned it will be forced to increase the price of posting letters and parcels as the company battles soaring costs.
In its annual results yesterday, the company warned it was facing "clear headwinds" this year, including slowing economic growth and surging inflation.
Chairman Keith Williams said this meant the business would have to raise prices and ramp up cost-cutting measures.
Earlier this year, the firm hiked first-class stamp prices by 10p to 95p and second-class stamps by 2p to 68p.
Royal Mail has now increased its cost-cutting target to more than £350million from £290million previously.
A spokeswoman told the BBC: "We haven't made decisions on future prices, but we always carefully consider the impact on our customers and ensure that any changes help to secure the sustainability of the Universal Service."
Royal Mail said it was also continuing to change the business to cope better as its parcel business becomes more important than letter delivery.
Letter volumes have fallen by more than 60% since their peak in 2004-05 and by about 20% since the pandemic began. Meanwhile, parcel deliveries increased during the pandemic.
Simon Thompson, chief executive of Royal Mail, said: "As we emerge from the pandemic, the need to accelerate the transformation of our business, particularly in delivery, has become more urgent.
"Our future is as a parcels business, so we need to adapt old ways of working designed for letters and do it much more quickly to a world increasingly dominated by parcels."
Mr Thompson said that the focus would now be to work at pace with staff and trade unions to "reinvent this British icon for the next generations", give customers what they want, grow the business sustainably and deliver long-term job security.
The price-hike warning came as the business reported an 8.8% drop in pre-tax profits to £662million for the year to the end of March.
Royal Mail is also facing an ongoing pay dispute with its largest labour union.
In January, it said around 700 management roles would be cut. The company also axed a fifth of its managers - around 2,000 posts - in June 2020, shortly after the start of the pandemic.
Earlier this year the company was heavily criticised for delivery disruptions over Christmas and January. Citizens Advice estimated that 2.5million Royal Mail customers didn't receive important documents such as health appointments, fines or bills.
FTSE 100
The UK's top share index, the FTSE 100, had a bad day yesterday, finishing down 135 points at 7,302, as recession fears weigh on markets. However, it got off to a better start this morning, up 80 points at 7,381, shortly after opening.
Brent crude futures were down just under 1% at $110.98 a barrel.
Companies reporting today
- Trading update: Close Brothers Group