UK mail operator Consignia has set out funding plans aimed at paving the way for a wave of post office closures in urban areas.

Under the plans, sub-postmasters volunteering to leave the service would be offered two years' pay in compensation, while those choosing to stay on would be eligible for grants of up to �10,000 to help them modernise their branches.

The money would come from a �270m injection of government cash which still requires the approval of the UK parliament and European Union state aid regulators.

The compensation packages are designed to facilitate a cost-saving plan which could result in the closure of 3,000 post offices - about a third of the entire urban network.

Training needs

Reaction to the compensation plans was lukewarm.

One applicant for a sub-postmaster franchise in West London said the proposed modernisation grants would be better spent on more training for franchisees.

"We could all generate a lot more revenue if we improved the level of service," he told BBC News Online.

Other sub-postmasters surveyed by BBC News Online either had not heard of the plans, or were unwilling to discuss them.

Losses

The planned restructuringl is designed to stem hefty post office losses.

"Profitability is reducing to the point where it is increasingly difficult for sub-postmasters to run viable businesses, let alone invest in the future," said Alan Barrie, executive director of the Post Office Network.

The post office network has sales of �1.2bn, but is losing about �100m a year.

Many post office franchises have already shut down due to what they describe as a lack of support from Consignia.

Job cuts

Consignia's rural post offices and branches in deprived inner city areas are not being targeted for closure because they are seen as providers of essential community services.

Last month, Consignia announced 15,000 redundancies in its Parcelforce and distribution divisions.

The group has previously suggested that up to 30,000 jobs could be lost, equivalent to about 15% of its work force.

Consignia wants to cut costs by �1.2bn a year. The state-owned group was losing about �1.5m a day during the May to October period last year.