Superfast Broadband Roll-Out Running Late

The Government programme to roll out superfast broadband to 90% of the population is running late and lacks strong competition to protect public value, the National Audit Office has reported.

It has already announced that superfast broadband will reach 95% of the population by 2017, just two years after the original target of 90%.

Just nine out of 44 local projects are expected to reach the original target, according to the report, with the delay partly attributed to the EU State Aid process taking six months longer than expected.

The NAO said that competition among suppliers had been "limited", leaving BT as the only active participant and expected to win all 44 local projects.

It warned that the Department for Culture, Media and Sport (DCMS) had "secured only limited transparency" over the costs in BT's bids.

And it said the DCMS now expected BT to provide just 23% of the overall projected funding of £1.5bn - £207m less than expected.

Amyas Morse, head of the NAO, said: "The rural broadband project is moving forward late and without the benefit of strong competition to protect public value.

"For this we will have to rely on the department's active use of the controls it has negotiated and strong supervision by Ofcom."

Public Accounts Committee chairwoman Margaret Hodge said. "The DCMS has not had a good enough grip on its rural broadband programme."

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Slump In Pound Signals Gloom For Holidaymakers

The pound has fallen heavily against the dollar for the second time this week after key US jobs figures showed better than expected evidence of an economic recovery.

While stock markets rallied, seemingly shrugging off recent fears about US stimulus being slowly withdrawn, sterling lost two cents against the world's reserve currency when news of the positive employment data from the US emerged.

The pound, which had also dropped heavily the previous day when the Bank of England confirmed the base rate of interest was to remain at its current level for at least two years, fell below the $1.48 mark.

While such exchange rates are good news for exporters, it will hit the spending power of British holidaymakers heading to America.

The euro has also strengthened against the pound.

The US payroll rose by 195,000 in June and the jobless rate remained the same at 7.6% - raising hopes for a stronger economy in the second half of 2013. The forecast was for around 165,000.

Hiring was more robust in the two previous months than earlier estimated, with some 70,000 net new jobs in May and April.

The positive data was seen as suggesting that the US Federal Reserve may start to ease off its support for the economy as early as this autumn - while quantitative easing and low interest rates will continue to push down the pound in the UK.

The US job market and the economy have proved surprisingly resilient this year. Hiring and consumer confidence have remained steady despite higher taxes and federal spending cuts.

The US economy has added an average of 202,000 jobs a month for the past six months, up from 180,000 in the previous six. That suggests businesses are growing more confident in the economy.

If the gains continue, the Federal Reserve might start to scale back its bond purchases before the year ends.

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Economy: Bank Issues Rate Warning To Markets

Interest Rates To Remain Low

Updated: 7:47pm UK, Thursday 04 July 2013

By Ed Conway, Economics Editor

Let us get this straight: Today the Bank of England did nothing to interest rates.

It did nothing to quantitative easing; it even went so far as telling us that it would continue doing nothing a long, long way into the future.

Yet this all this doing-nothing amounted to the most radical shift in UK monetary policy for years.

Welcome to the bizarre world of post-crisis monetary policy.

What happened today was more significant than any small change in rates or QE: it represents a seminal shift in the way the Bank of England (and, for that matter, the European Central Bank) control the economy.

Hitherto, these institutions have refused outright to give any hint of where rates are likely to go in the future.

When asked by impertinent journalists, Sir Mervyn King and Mario Draghi would tend to say something like: "We never pre-commit to future decisions" or "we decide a month at a time - not in advance."

Today both the Bank of England and, a few hours later, the ECB, committed to holding interest rates low for an extended period.

In the ECB's case this meant a vague commitment along those lines.

In the Bank of England's case, it meant a statement released alongside the no-change decision saying: "In the Committee's view, the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy."

To translate, up until recently investors were expecting the Bank to leave interest rates on hold at 0.5% all the way until the end of 2016 and the Bank was quite comfortable with this.

But recently, on the back of speculation about the US Federal Reserve tightening policy, this changed.

By last night, investors were pricing in the first increase in rates by late 2015.

The Bank's statement today is a direct refutation of this.

It is not formal forward guidance, such as we may well get when Carney has hammered out the new remit with the Chancellor next month, but it is guidance nonetheless - and a big shift.

So it is not surprising that markets immediately reacted to the news: the cost of government bonds jumped (as investors speculated that the Bank will not be selling off its QE stash of bonds anytime soon - in fact, may well buy more of them); the pound fell sharply against the dollar (looser monetary policy means less return from sterling-based investments).

Markets, in other words, are mulling the fact that the Bank is likely to be more open in the future about its plans.

And this matters: after all, long-term interest rates - the ones against which mortgages and loans are priced - are determined as much by those market expectations as by the Bank rate itself.

So does this shift, which we have seen the first move in today, represent a sea change?

Not really. There is nothing new about central banks attempting to condition market expectations of its future rate decisions.

The notion that the only tools they have at their disposal are rates or QE is misguided: for years the Bank of England has used the Inflation Report to give subtle guidance as to its future policy decisions.

Its policymakers used carefully-worded speeches to signal where they were heading.

Sir Mervyn King used to call this the "Maradona effect": in that World Cup '86 goal where he dribbled through almost the entire England team before slotting the ball beyond Peter Shilton, he actually followed a relatively straight line, but the "defenders reacted to what they expected Maradona to do."

Forward guidance, in other words pre-committing to a certain level of interest rates for a certain amount of time, or until a certain condition has been met, is a logical extension of this - a less cryptic method, but with essentially the same aim.

Nor is forward guidance itself a new idea: back in 2002, in his famous "helicopter money" speech, Ben Bernanke posited that central banks could "commit to holding the overnight rate at zero for some specified period."

However, it is only now that such ideas are becoming formal policy.

Next month Mark Carney will issue his formal response to the Chancellor on whether he wants to implement forward guidance in the UK, but today's statement suggests he has already made up his mind.

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Portugal: Deal Saves Coalition Government

A deal has been reached to save Portugal's centre-right coalition government, the country's prime minister Pedro Passos Coelho has said.

The coalition was threatened with break-up because of a dispute over austerity policies but Mr Passos Coelho said "a formula" had been found that secures its survival.

The policies squeezing the bailed-out nation had led markets to plunge on Wednesday.

But they rallied after Mr Passos Coelho said he was "convinced" he could maintain government stability despite his finance and foreign ministers saying they were quitting.

European Central Bank chief Mario Draghi sought to soothe market nerves, saying Portugal's economy was "in safe hands" with finance minister Vitor Gaspar's successor, Maria Luis Albuquerque.

The Portuguese reform process has been a "painful route and the results achieved have been quite significant, remarkable, if not outstanding", Mr Draghi told a news conference in Frankfurt.

The Portuguese stock market's PSI-20 index rose to close 3.73% higher on Thursday, after plunging 5.31% on Wednesday.

Pressure on the bond market eased, too, with the Portuguese benchmark 10-year government bond yield sliding to 7.40% in the afternoon, having soared to 8.106% the day before.

Foreign minister Paulo Portas's resignation had threatened to sink the government because he is also leader of the junior partner in the governing coalition, the small conservative CDS-PP party.

But the PM, desperate to hold together the coalition led by his Social Democratic Party (PSD), refused to accept Mr Portas' resignation.

The prospect of a deal emerged when the CDS-PP leadership asked Mr Portas to meet with the premier to find "a viable solution for the government of Portugal".

Mr Passos Coelho and his foreign minister held talks in a "very positive atmosphere", the premier's office said earlier.

Portuguese newspapers said the prime minister could reshuffle the cabinet to give Mr Portas the post of deputy premier in charge of the economy.

"The prospect of a snap election is so terrifying for the PSD that the prime minister will do anything to save the coalition," said Antonio Costa Pinto, a political scientist at Lisbon University.

Socialist opposition leader Antonio Jose Seguro had urged the Portuguese president to call snap elections in a meeting on Wednesday.

European Union leaders, fearing a resurgence in tension in the eurozone's debt-laden periphery, pressed Lisbon to resolve the crisis.

"The political situation should be clarified as soon as possible," the European Commission's Portuguese president, Jose Manuel Barroso, said on Wednesday.

The government has imposed unpopular spending cuts and tax rises under the 2011 bailout deal agreed with the "troika" of creditors - the European Commission, the European Central Bank and the International Monetary Fund.

It is now under pressure to present a further 4.7 million euros (£4m) in spending cuts to the troika when its delegates visit on July 15.

The austerity measures have plunged Portugal into a deeper recession with higher unemployment than had been expected, sparking mass protests and strikes.

In his resignation letter, Mr Portas had said he disapproved of the prime minister's naming of Treasury Secretary Maria Luis Albuquerque as the new finance minister.

Her appointment was seen as an indication that Mr Passos Coelho intended to push on with austerity despite protests.

"The big fear is this country has failed to demonstrate economic growth since its bailout and its government has also been unable to meet targets set out by the troika," said Ishaq Siddiqi, strategist at London-based brokerage ETX Capital.

"Now, without a stable government in power, investors are concerned Portugal will be unable to meet its debt obligations."

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Portugal: Markets Fall As Crisis Deepens

Portugal's financial crisis has reignited, triggering a stock market plunge and once again raising the spectre that its borrowing costs could soon become unsustainable.

Share prices plummeted 6% in early trading on Wednesday and other major stock markets, including the FTSE 100, also fell sharply.

Investors were reacting to growing political turmoil after Foreign Minister Paulo Portas resigned on Tuesday night, a day after the shock departure of Finance Minister Vitor Gaspar amid growing unrest against austerity.

Prime Minister Pedro Passos Coelho has defied calls to follow suit but the resignations at the top of the centre-right government have left deep concerns over not only the coalition's future but Portugal's ability to pursue the steep savings, demanded by creditors, in return for continued bailout support.

There has been a fierce public backlash against the austerity drive, in what is one of the poorest countries that uses the euro.

Values correct at 09:24 BST

But unease among investors about whether that tough savings programme will continue has forced up the country's borrowing costs too on bond markets.

The yield - the percentage Portugal pays to service its debts - on the country's benchmark 10-year bond spiked just below 8% on Wednesday.

A 10-year borrowing rate of about 8% is widely considered unsustainable.

Spanish and Italian yields jumped too while nervousness over the state of Greece's next tranche of bailout money also caused jitters on stock markets as well.

"With disorder and uncertainty over the political situation in Egypt threatening stability in the Middle East, and a Greek deadline looming to prove it can action its bailout conditions before receiving the next tranche of aid, volatility is likely to be high," Mark Ward, head of trading at Sanlam Securities, said.

Jose Manuel Barroso is monitoring developments with "concern"

The President of the European Commission, Jose Manuel Barroso admitted the situation in Portugal was a worry.

He said: "The initial reaction of the markets shows the obvious risk that the financial credibility recently built up by Portugal could be jeopardised by the current political instability.

"If this happens it would be especially damaging for the Portuguese people, particularly as there were already preliminary signs of economic recovery.

This delicate situation requires a great sense of responsibility from all political forces and leaders. The situation should be clarified as soon as possible."

He concluded: "We trust that Portuguese democracy will deliver a solution ensuring that the sacrifices the Portuguese people have made until now will not have been in vain."

It later emerged that Portugal's president would meet the prime minister and leaders of political parties on Thursday in a bid to settle the uncertainty.

President Anibal Cavaco Silva has the power to call snap elections.

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Electricity Theft: Ofgem Urges Crackdown

The energy regulator could force electricity suppliers to tackle power theft because of the growing cost to households.

Ofgem estimates that 25,000 cases of electricity theft annually cost law-abiding consumers £200m - or £7 per household - with a third of the loss blamed on cannabis farms.

The watchdog said its proposals would require energy suppliers to bring in measures to detect, investigate and prevent cases of theft - with fines for those companies which fail to comply.

A code of practice would be compiled, Ofgem said, through companies sharing information on investigations between themselves and agencies including the police, while a 24 hour public hotline is also planned to help identify offenders.

Andrew Wright, Ofgem's chief executive, said: "Ofgem wants to make sure that consumers are paying no more than they need to for their electricity, and lives are not put at risk.

"It's critical that suppliers do all they can to clamp down on electricity theft.

"The reforms build on similar obligations we introduced at the start of this year for suppliers to address gas theft more vigorously."

Energy UK, the trade association of the energy industry which represents more than 80 companies, welcomed the proposals.

A spokesman said: "Electricity theft is dangerous and illegal. Contact with live electricity cables can kill and tampered meters cause fires.

"Electricity theft also costs honest customers money which is why energy companies take this - and gas theft - very seriously."

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Lebedev Found Guilty Over TV Chat Show Brawl

Media magnate Alexander Lebedev has been found guilty of battery over a brawl on a TV chat show in his native Russia.

The financial backer of Britain's Independent and Evening Standard newspapers was sentenced by a court in Moscow to 150 hours of community service, avoiding a prison term.

He had claimed the case against him was politically motivated, depicting the trial as President Vladimir Putin's revenge on him for criticising the government.

Last week, the opposition surprisingly dropped the main charge against Lebedev, of "hooliganism motivated by political hatred", which carried the threat of several years in prison.

Instead, they asked for his movements to be restricted for 21 months and for him to be banned from large public gatherings.

Alexander Lebedev has been convicted of assault over the TV punch up

Speaking after sentencing, Lebedev's lawyer, Genry Reznik, said his client was "ashamed" of the verdict, which his team would appeal.

Lebedev, a former London-based KGB agent, punched property tycoon Sergei Polonsky on a Russian political chat show in September 2011, knocking him to the floor.

He claimed he was protecting himself and that the subsequent charge of hooliganism was disproportionate. 

Last week, Mr Polonsky called for Lebedev - who is estimated to be worth more than £700m - to be forgiven.

Lebedev is rare among oligarchs in speaking out against the Kremlin since the imprisonment of oil tycoon Mikhail Khodorkovsky, who was arrested in 2003 after falling out with Mr Putin. Khodorkovsky's Yukos oil company was broken up and sold off, mainly into state hands.

Lebedev, who co-owns a campaigning Russian newspaper critical of Putin, also portrayed the case as part of a broader crackdown on the opposition since the former KGB spy returned to the presidency in May 2011 following protests.

Mr Polonsky spent three months in jail in Cambodia this year for allegedly attacking the crew of a boat after a dispute erupted during a New Year's Eve outing.

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Banks To Unleash Ad Blitz In Switching War

Britain's biggest banks are preparing to unleash an advertising blitz costing tens of millions of pounds in an attempt to protect their market share as new rules are introduced to encourage speedier account transfers between rivals.

Sky News has learnt that the big five high street banks - Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Santander UK - have booked huge volumes of media space during the late summer as they brace for a new seven-day current account-switching system.

The Government and the industry have agreed a mid-September launch for the initiative, which ministers hope will accelerate switching levels to the benefit of new entrants such as Metro Bank.

All of the big five are preparing to spend significant sums on marketing in September, with one advertising executive estimating that they could fork out as much as £20m in that month alone.

Lloyds is understood to be planning a major outlay on continuing to position its Halifax subsidiary as a "challenger" bank, while Santander UK is expected to spend a large sum on its 1-2-3 current account offer.

RBS, which is 81% owned by British taxpayers, is thought to be preparing a major campaign focused on customer service improvements.

"You can't book advertising space anywhere," the head of one major UK retail bank said.

"It's all gone already."

The disclosure that the major banks are preparing mass advertising campaigns in the run-up to the deadline will stoke fears that the dominant players will simply use their greater financial firepower to continue to shut out smaller banks.

Between them, the five largest lenders account for an overwhelming share of the current account market, with last month's report by the Parliamentary Commission on Banking Standards criticising the industry's treatment of customers and the speed with which the Government has imposed change upon it.

The technology required to support the new switching system has cost approximately £750m.

If it is not judged to be successful, the commission recommended that a full account portability model be considered, which banks have warned privately would cost many billions of pounds.

New entrants to the retail banking market have been buoyed by moves to ease onerous capital and liquidity requirements set by the industry regulator, but they have warned that these will be insufficient to trigger a genuine shift in the competitive landscape.

Sky News understands that the big banks have been operating a "buddy system", which pairs rival banks to help test systems' readiness ahead of the September deadline.

A working group overseen by the Payments Council, the body which oversees payment systems, has been supervising the changes for months.

Insiders at some of the big banks have, though, privately expressed concerns about the readiness of their competitors to meet the deadline.

RBS alone has around 500 staff working on the project, many of whom are contract employees.

"The industry is only going to be as strong as the weakest link on this," said one banker last month.

Concerns about the banks' readiness has been exacerbated by their poor track record at implementing and maintaining sophisticated IT systems in recent years.

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China's ICBC Bank Now Bigger Than US Giants

A Chinese bank has been ranked as the world's largest, overtaking two American finance giants.

Industrial and Commercial Bank of China (ICBC) leapfrogged the US banks to top the global ranking of banks with the most capital.

The shock ranking has highlighted the growing size and importance of Chinese lenders.

ICBC topped The Banker magazine's annual list of the top 1,000 banks for the first time.

The magazine relegated the Bank of America to third from first, while JPMorgan Chase remained in second slot.

China's ICBC was ranked third last year by the magazine, which is owned by the Financial Times.

The rankings are based on Tier 1 capital as a measure of a bank's ability to lend on a large scale and endure shocks.

ICBC has for some time ranked as the top bank by market value.

Britain's HSBC, which gains much of its earnings from Asia, was fourth in The Banker's list, with China Construction Bank (CCB) ranked fifth.

China had four banks in the top 10 and 96 in the Top 1,000.

Its top four lenders - ICBC, CCB, Bank of China and Agricultural Bank of China - filled the top positions for profit in 2012.

ICBC's $49bn (£32bn) profit put it top of the profit table for a third successive year.

Total profit for the biggest 1,000 banks is now back close to levels achieved before the 2007/09 financial crisis, but the regional share has shifted significantly,

The Banker said that in 2006 European banks accounted for 46% of global profits and 58% of assets, but last year that had dropped to less than 2% of profits and 43% of assets.

Asia's banks have lifted their share of profits to 56% from 19% in the same time and increased their share of assets to 35% from 22%.

Spain's Bankia posted the biggest loss last year at £21bn , with six of the 10 biggest losses coming from Spain, the magazine estimated.

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RBS Plots £500m Debt Collector Float

By Mark Kleinman, City Editor

One of Britain's biggest debt collectors is targeting a £500m stock market flotation that would loosen its ownership by the state-backed Royal Bank of Scotland (RBS).

Sky News has learnt that Arrow Global, which is based in Manchester and has nearly four million customer accounts, is being groomed for a public listing that could take place as early as this year.

Arrow Group chairman Sir George Mathewson

Investment banks including Goldman Sachs, Canaccord Genuity and Lazard are understood to have been lined up to work on a flotation, although people close to RBS's Special Opportunities Fund, which is the owner of Arrow Global, said no final decision had been taken about the move.

Last year, RBS held detailed talks about a merger of Arrow Global with Lowell, another debt collection agency, but the discussions faltered over the owners' valuations of the two companies.

The RBS Special Opportunities Fund is a private equity vehicle managed by the bank but in which it has only a minority stake. People close to RBS have suggested that a sale of Arrow Global would be "reputationally helpful" given the controversy that stalks debt collection businesses.

News of RBS's plans to float the company emerged on the same day that another contentious segment of the financial services sector, the payday lending industry, came under fire at a Government-organised summit.

Arrow Group, which negotiated a new £110m debt facility last year, claims to be "committed to facilitating positive outcomes, and strongly believes that what is good for the customer is also good for business".

The company is run by Tom Drury, former chief executive of Shanks, the waste management group.

Its chairman is Sir George Mathewson, the former chief executive and chairman of RBS, who has been a prominent figure in the debate about the reshaping of Britain's banks.

Arrow Global's asset portfolio consists of consumer and commercial credit including credit card, personal loan, retail, motor, mortgage, telecommunication and utility receivables. More than 80 per cent of Arrow Global's assets are in the UK with the remainder in continental Europe.

The business buys outstanding consumer debt at a discount from lenders who have written it off, then collects it. The average individual debt under its management is £3,000.

Arrow Global made £19m in profit in the first quarter of the year and now has more than £8.5bn under management.

RBS declined to comment on its plans.

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Orangina Owners Reunite For £1bn Ribena Tilt

By Mark Kleinman, City Editor

The former owners of Orangina have reunited for a £1bn-plus tilt at Lucozade and Ribena, two of the biggest brands in Britain's beverages market.

Sky News understands that Blackstone and Lion Capital, two private equity firms, have joined forces to submit a formal offer for the two soft drinks, which have been put up for sale by GlaxoSmithKline, the FTSE-100 pharmaceuticals manufacturer.

Blackstone and Lion, which have hired bankers at Rothschild to advise on their bid, have enjoyed previous success in the sector.

In 2005, they acquired the European beverages division of Cadbury-Schweppes, selling it four years later to Suntory, the Japanese food and drink producer, for roughly £1.5bn.

Suntory, which is one of the world's largest soft drinks producers, is one of the rival bidders to Blackstone and Lion in the current auction.

Other buyout firms, such as Bain Capital, CVC Capital Partners, KKR and Onex, a Canadian fund, are among those also considering offers.

The auction of Lucozade and Ribena comes at a time of potential change in the UK soft drinks market.

Britvic and AG Barr, which makes Irn-Bru, recently saw their merger approved by competition authorities.

However, there is scepticism about whether the deal will ultimately happen because of the shifts in the relative shifts in the value of the two companies since it was conceived.

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Cameron In Kazakhstan For Trade Mission

David Cameron will hold talks with Kazakhstan's President Nursultan Nazarbayev today as part of a controversial trade mission to the country.

The official visit, the first by a serving British premier, is aimed at building strong business links and deals worth £700m to UK firms are set to be signed.

But Mr Cameron has been forced to reject assertions he was putting economic ties with the mineral-rich nation ahead of concerns over human rights abuses.

The Prime Minister insisted that "Britain always stands up for human rights wherever we are in the world" and said the allegations would be raised in the talks.

He said: "We will raise all the issues including human rights. That's part of our dialogue and I'll be signing a strategic partnership with Kazakhstan.

David Cameron recently met with Pakistan's PM Nawaz Sharif

"We need for Britain to get out there and win. We need our businesses to win.

"We need that growth and investment. Countries like Kazakhstan are rapidly growing and one day will be among the top 10 producers."

Campaign group Human Rights Watch have claimed there is a "serious and deteriorating" situation in Kazakhstan.

This includes "credible allegations of torture, the imprisonment of government critics, tight controls over the media and freedom of expression and association, limits on religious freedom, and continuing violations of workers' rights".

Amnesty International UK's head of policy and government affairs Allan Hogarth said: "Kazakhstan might be knee-deep in oil and gas wealth, but David Cameron shouldn't let lucrative energy deals prevent him from raising human rights during his trip."

The Prime Minister is leading a 30 strong business delegation to the country as he seeks to open a new chapter in the relationship with Kazakhstan.

Downing Street has acknowledged Mr Cameron is playing "catch-up" because other Western leaders have already visited the country.

Kazakhstan is experiencing rapid growth due to its vast oil and mineral reserves.

The Government believes British firms could secure contracts in Kazakhstan worth up to £85bn over the coming years.

Mr Cameron and Mr Nazarbayev began talks last night during a two hour flight on the presidential jet.

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Facebook To Remove Adverts From Adult Pages

Facebook will stop advertisements appearing on pages containing sexual or violent content after a number of companies suspended their campaigns.

Marks and Spencer and BSkyB, the parent company of Sky News, were among those to pull their adverts from the social networking site because of concerns about placement.

It led Facebook to announce a tightening of its review process, preventing promotions from appearing on pages and groups which contain offensive content.

"Our goal is to both preserve the freedoms of sharing on Facebook but also protect people and brands from certain types of content," a spokesman said in a blog post.

"We know that marketers work hard to promote their brands and we take their objectives seriously.

"While we already have rigorous review and removal policies for content against our terms, we recognise we need to do more to prevent situations where ads are displayed alongside controversial pages and groups."

In the first three months of the year, 85% of Facebook's revenue came from advertising - up 43% on the same quarter in 2012.

Advertisers paid a total of $1.25bn (£820m) to promote their products and services to the website's reported 665 million daily active users.

The company is paid around 3% more per advert than it was 12 months ago.

Facebook said its advertising review process will be manual at first but an automated system is expected to launch within weeks.

The spokesman added: "Like any digital platform, we're not going to be perfect but we will be much better.

"We'll continue to work aggressively on this issue with advertisers.

"We're confident the immediate steps we're taking will result in a significantly improved approach to preventing these instances from occurring, and we're committed to making this process work for everyone who uses Facebook."

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Crown Post Office Staff Stage Strike Action

By Emma Birchley, East of England Correspondent

Post Office workers have gone on strike over plans to close 70 state-owned branches and a dispute over pay.

The closing Crown branches - which are currently directly managed by Post Office Ltd - would be franchised and put within retailers such as WH Smith, which has already happened in some towns.

Debbie Spiteri, who works at the Dagenham branch in Essex, has been employed by the Post Office for 32 years and said she thought she had a job for life.

"I thought I would be here until I retired in my 60s, but now it looks like I may be made redundant, looking for another job and at my age I didn't want to be doing that," she said.

"I feel sorry for the local people. A lot are elderly and if they have to go somewhere else, they won't. They won't go into a shop to do their business because to them they want the personal touch."

The Post Office insists staff will be transferred to a new employer or offered voluntary redundancy, but the Communication Workers Union predicts 800 jobs will be lost.

Roger Gale, general manager of the Post Office's Crown and WH Smith network, said the changes are needed.

"It's absolutely not a programme of closing post offices," he said.

"We want to retain post office services on the high street but we have to do it in a way that doesn't lose tax-payers' money.

"What we're trying to do is get the Crown Network to a point where it breaks even. It currently loses £37m a year of tax-payers' money and what we're trying to do is to remove that loss."

The 373 Crown offices, which are usually the larger ones, represent just 3% of the total post office network.

But the CWU says its staff deal with a fifth of all customers and handle 40% of financial transactions involving things like banking and credit cards.

Clive Tickner, the CWU's representative for the Dagenham area, questions the timing as the Post Office launches its new current account.

"Ironically, if they close down Crown offices there will be less outlets to transact the current account so I'm very, very concerned that they are eroding away at the Post Office so that there will be nothing left in a few years' time," he said.

There is also concern about the impact on the high street.

Deborah Satchell works at Heathway Dry Cleaners in Dagenham.

She said: "It will affect the local shops because people will go elsewhere to do what they have got to do and it will take the business away from the local community."

The strikes are the seventh round of action in the current dispute and will only affect the Crown branches.

Staff are also calling for a pay rise of 3.5% for 2012/13 and a further rise this financial year, but the Post Office says that is not possible when it is making losses.

Instead, it is offering a series of cash payments totalling up to £3,400 before April 2015.

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