After reporting the first losses in 24 years, the Post Office has warned that up to of 4000 jobs may be axed. The company also says that increased competition will put more pressure on profits.

In a further warning, the Post Office said it was likely to accelerate the closure of rural post offices during the next 12 months, a move especially due to the Government's decision to start paying benefits through bank and building society accounts from the year 2003. Payment of benefits through the Post Office account for around one third of its income, amounting to some £400 million a year.

Post Office chief executive, John Roberts, speaking about the current situation said that he was optimistic about replacing the lost revenue through the new opportunities it was about to get, and he went on to outline the company's intentions to step up overseas expansion. The Post Office has £500 million earmarked for acquisitions this year.

That Post Office recorded £171 million pre-tax loss in the year to the end of March compared to a previous year's figure of £608 million.

Abandoning its plans to computerised the Post Office Counters network (code named the Horizon project) cost the company £571 million, contributing to after-tax losses of £264 million. Government targets for Post Office pre-tax profits for the current year are £392 million compared with last year's figure of £474 million.

A government spokesman confirmed that despite the collapse of the Horizon project, they were still investing £1 billion to automate the Post Office Counters business.

The Post Office achieved staffing reductions of 2,500 last year. It is anticipated that a further 3,000 staff jobs will disappear this year, plus an additional 600 management posts.

The overseas expansion plans are likely to increase the shareholding in General Parcel, a European wide network of parcel operators.