Royal Mail’s parent firm has blamed the budget for a failure to return to profitability, warning it cannot rule out price hikes and job cuts in response.

International Distribution Services (IDS) said it had set aside £134m in the first half of its financial year, with £120m directly linked to Chancellor Rachel Reeves’ hike to employer national insurance contributions (NICs).

The budget raised NICs by 1.2 percentage points to 15% from April 2025, and also lowered the threshold for when firms start paying to £5,000 from £9,100 per year.

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The company’s complaints chime with those of other major employers, with the retail sector claiming it faces a £7bn leap in costs alone next year due to budget measures. The hospitality industry fears a £3.5bn hit.

Royal Mail has 130,000 staff. Chief executive Martin Seidenberg claimed the hike to NICs was uncompetitive because it employs far more people than its rivals.

He said it would hasten Royal Mail’s need to seek greater automation and service reform.

Ofcom, the industry regulator, is already examining whether it would allow Royal Mail to ditch Saturday deliveries for second class letters.

Mr Seidenberg added: “We are seeing quite a significant burden from the national insurance increase.

“We are looking at a bunch of measures but it is too early to say what we will do. They will be about pricing, cost efficiencies and other ways we can move forward.”

He concluded: “Anything that would impact our people would be last resort but we are working this through.”

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The budget-linked write down, he said, meant that IDS made a bottom line £26m loss over the six months to 29 September as the £134m provision swallowed up operating profits achieved in the period thanks to rising revenues.

The company spoke of its challenges as it continues to await the result of a government review of its proposed £3.6bn takeover by Czech billionaire Daniel Kretinsky.

The terms of the deal were announced in May but it is currently the subject of scrutiny under the National Security and Investment Act.

It is being opposed by the postal workers’ union, which has long been at loggerheads with Royal Mail and IDS management.

The Communication Workers Union claimed the company’s results announcement amounted to a muddying of the waters.

Deputy general secretary Martin Walsh said: “Royal Mail and IDS should never have been split as a company.

“It was done by the board to present Royal Mail as a basket case and create the false narrative ready for the down-dialling of postal services in the UK and the loss of tens of thousands of jobs.

“For the overall company to already essentially be at break-even point after years of gross mismanagement is a testament to the work of every postal worker in the UK.

“It also shows the company can have a brighter future if the focus goes back to properly rewarding its employees and delivering for its customers.”