Regulators should cap private competition to the Royal Mail, union reps urged yesterday as bosses warned nationwide post deliveries were at risk.

Chief executive Moya Greene told a hearing of Parliament’s business select committee that private companies were “cherry-picking” lucrative delivery routes while leaving rural corners to the recently privatised Royal Mail.

Her plea came after the company announced a 21 per cent drop in first-half operating profits.

Ms Green said the universal service obligation (USO), under which Royal Mail must deliver to all British addresses at a uniform stamp price, cost £7.2 billion a year because of the expense of delivering to rural and remote areas.

She told the MPs the USO was dependent on internal subsidies.

“Low-cost, high-density areas are needed to cross-subsidise suburbs and rural areas which are much higher cost,” she said. “If you allow cherry-picking you undermine the economics.”

Letter deliveries are decreasing by 4 to 6 per cent a year — and the growing parcels trade was expected at privatisation last year to plug the gap. Now private post workers, with worse pay and conditions, are increasingly making final-mile parcel deliveries themselves — but only in urban areas.

The Communication Workers’ Union (CWU) has suggested competitors either pay into a “universal service fund” to subsidise high-cost deliveries or cap competition at its current level.

CWU general secretary Billy Hayes, who also gave evidence, said: “We hope that Ofcom will wake up to the reality that action needs to be taken now to save the USO.”

Business Secretary Vince Cable claimed vindication, suggesting recent volatility proved that the government had been right to price Royal Mail shares at a low value.

But Labour continued to attack the government for undervaluing the network.

“Labour warned that David Cameron’s Royal Mail fire sale would put vital services at risk, and Moya Greene’s evidence today has confirmed our worst fears,” said shadow post minister Ian Murray.

“It comes after taxpayers were short-changed by hundreds of millions of pounds by the botched sale.”

When asked whether he supported the CWU’s proposed measures, Mr Murray did not respond to requests for comment.