Royal Mail is undergoing a shake-up

Under the deal, private firm UK Mail will offer a service to business customers from April.

The deal follows controversial plans drawn up by the regulator to end Royal Mail's monopoly on collecting letters.

Royal Mail bosses had argued that the changes would jeopardise the finances of the business.

There was also concern that the reforms could undermine the Royal Mail's ability to deliver to every household in the UK.

More deals in the post?

But now Royal Mail has reached an agreement with the private operator UK Mail and without any need for intervention from the regulator.

From April this year, UK Mail will collect batches of 4,000 letters or more from business customers, sort them and hand them to the Royal Mail whose staff will deliver them to households.

Royal Mail chief executive Adam Crozier said it was a landmark deal which would provide a commercial income without weakening the network.

He said he was ready to discuss contracts with other private post companies.

Two years ago, Royal Mail was losing more than �1m a day.

It is in the midst of a three-year regeneration programme which involves shedding 30,000 jobs by 2005 and abolishing the second delivery of letters.