The German postal firm Deutsche Post has been granted a short-term licence to start mail services in the UK.

The move is expected to give the company an advantage when full competition is finally introduced into the UK postal market.

The UK post regulator Postcomm said the company would be able to provide a mail service to a small group of new clients, and existing clients of the German company's cross-border services.

Deutsche Post will be allowed to collect pre-sorted and some unsorted mail from customers, but will pass about 90% of it on to Consignia for delivery.

The licence limits the number of items Deutsche Post can handle to 40 million a year, which is about half the amount carried each day by Consignia.

More change on the way

Full competition in the UK's postal market is due to arrive by the end of 2007.

The UK postal service Consignia is taking drastic measures in order to prepare it for the introduction of rival operators.

The company - which is in the process of renaming itself Royal Mail - has already signalled its intention to cut as many as 30,000 jobs by mid-2003, and also aims to shut hundreds of post offices.

It hopes this will help stem the massive losses it was making - during the six months to November last year it lost �1.5m a day.

Deutsche problems

Deutsche Post already operates a joint venture with Securicor to carry parcels and freight in the UK.

Reports have also said that it is planning to launch operations in Japan.

But the German firm has been having problems in its domestic market.

It has been hit by a demand from the German regulator for a cut in the price of stamps.

And it announced a sharp fall in half-year profits in July after the European Union ordered it to repay 570m euros in state aid during the period.