Consignia rail freight deal brings deliverance for Byers

Consignia is close to agreeing a deal with Railtrack that would remove the threat of the mail group shifting UK deliveries from rail to road.

The renamed Post Office is expected to announce next month that it will continue to be a major user of the railways, through contracts with the freight company EWS. That will come as a relief to Stephen Byers' Department of Transport. It had feared that if Consignia turned its back on the trains, the Government's rail freight targets would be untenable. But Consignia, whose chairman is Allan Leighton, is also expected to propose a radical shake-up of the way mail is moved.

At present, EWS runs 58 trains a day for Consignia, on a contract worth £65m a year. The trains stop at hundreds of small stations to drop the post. But Consignia wants to visit fewer stations and make larger drops, which would lead to a slight increase in the use of road haulage services.

Consignia's move is driven by two forces. Since the Hatfield rail crash, the group has complained of unreliable trains. In November, it cut three routes, which aroused fears that it would axe other major routes, or make an exit from rail delivery altogether.

But the loss-making Consignia is also trying make a £1.2bn cost saving. The new delivery proposals could be run with fewer staff.

* Chiltern Railways will this week name Royal Bank of Scotland as its backer for improvements to its network. The bank is providing the company with a £60m loan over 10 years.