Royal Mail says it loses 6p for every stamped letter

The regulator said the move would help Royal Mail "tackle its deteriorating financial situation". A final decision on the plan will come later this year.

Postcomm had previously said second class stamps may rise from 24p to 26p.

However, it added that Royal Mail, which is being hit by strikes, must "urgently" cut its costs.

The ball is now firmly in Royal Mail's court to address urgently its very high cost base Nigel Stapleton, Postcomm chairman

It is the company's plans to limit pay rises and modernise the business that have sparked the current series of 24-hour walkouts.

Postcomm said that the Royal Mail could not blame increased competition in the bulk mail and business delivery sectors for its financial woes.

It said that the Royal Mail had lost share in those sectors because of its competitors' "greater efficiency and customer focus".

Cost focus

Postcomm has decided not to further increase the level by which Royal Mail can lift the price of first class stamps, which can continue go up from the current 34p to 37p by 2010.

The next stamp price rises are due in April 2008.

"The ball is now firmly in Royal Mail's court to address urgently its very high cost base," said Postcomm chairman Nigel Stapleton.

Royal Mail says it makes a loss of 6p for every piece of stamped mail it delivers.