Allan Leighton says the Royal Mail cannot move any higher

With the Communication Workers Union (CWU) due to set dates for a series of national walkouts, Mr Leighton insisted he had no room to manoeuvre on money.

"The money on the table is the money on the table because that is what the business can afford," he told the BBC.

The CWU said the strikes will go ahead unless a breakthrough is reached.

Both sides have said they are keen for fresh talks.

'What is affordable'

"People think it's a matter of negotiation, but 2.5% is what is affordable at the moment," said Mr Leighton.

"Businesses like ours that are competing in a commercial environment can't afford to pay money out that we don't have."

CWU deputy general secretary Dave Ward earlier this week accused Royal Mail bosses of "being in denial".

"It is outrageous that the business is ignoring the clear message from their workforce and appear to be provoking a postal strike rather than resolving one," he said.

If a nationwide postal strike does go ahead, it would be the first since 1996.