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• Daily postbag has fallen to 62m from 80m five years ago • Average person spends just £18 a year on postage The Royal Mail signalled fresh job losses on Tuesday after reporting a £120m loss in its letters and parcels business following a huge slump in the number of people sending post. The daily postbag has fallen from 80m items five years ago to 62m, a decline of 20%, with further reductions of 5% a year predicted. Chief executive Moya Greene said the average person was spending just £18 a year on postage, highlighting the rise in texts, which now make up 50% of personal messaging, and emails. Around 65,000 full and part-time workers have left the business since 2002, including 5,500 in the past year, while 12 mail centres have closed and a further 16 are set to shut. The letters and parcels business is now losing £2m a week, with losses for the 2010/11 financial year totalling £120m – the worst for seven years – compared with a £20m profit in the previous year. The Royal Mail Group made an operating profit of £39m, down from £180m, with profits at the Post Office arm of the business declining from £33m to £21m as a result of lower revenues. The General Logistic Systems business, which delivers parcels across Europe, saw its profits rise by 5.3% to £118m in the last year. Greene said the Royal Mail was in the middle of “very important” change, predicting further mail centre closures and job losses because of the decline in its business. “With the decline in our volumes, we are going to be a smaller company in the future than we are today,” she said, although she declined to put a figure on how many postal workers will be made redundant. “The next two years will be challenging. We need to reduce our costs faster than the decline in revenues from our core letter business, “The pace of change in our mail centres will continue. We expect that around half of the mail centres could close by 2016/17.” There are currently 59 mail centres, with two set to close in London, which has sparked the threat of a strike by members of the Communication Workers Union. Greene launched a new attack on the regulatory regime the Royal Mail has to operate under, saying the organisation lost 2.5p on every letter it delivered for a competitor, totalling £160m of losses in the past year alone. The regulatory regime was a “stranglehold” on the business, said Greene, calling for a less “punitive” system to be introduced by the government. Royal Mail also revealed that its pension deficit had fallen from £8bn to £4.5bn following the government decision to change the inflation measure from RPI to CPI, as well as an increase in asset values. But the organisation said its pension deficit was a “disproportionate burden”, with cash payments of £771m made last year. Around £400m has been invested in modernisation, while the jobs of more than 100,000 workers were changing, said Greene. “We have to develop new products and services to meet the needs of our customers and generate additional revenues to offset the decline in earnings from our letters business.” Greene said progress had to be made in areas including lifting the “crushing” pensions liability and changing the regulatory regime before the Royal Mail is privatised. The postal services bill has been passed, but the privatisation is not expected before next year. Greene said she had always maintained the Royal Mail was going to be smaller, but it would be “disrespectful” to put a figure on how many jobs could be lost, adding: “It is very sad to say that, but it is necessary for a high quality service to be sustained.” Previous cuts were achieved through voluntary redundancy and Greene said she hoped that would continue. “I have seen nothing that will shake my belief that we will be able to manage this on a voluntary basis. “We are not seeing any reduction in the willingness to take up voluntary redundancy.” Greene, who moved from Canada to take over from previous chief executive Adam Crozier almost a year ago, said Royal Mail had been forced to transfer £1bn of revenue to its competitors because of the regulatory regime. Job losses Royal Mail Postal service guardian.co.uk