Post Office jobs appeared more secure this week as it agreed a 10-year deal with Royal Mail to continue to provide postal services after the two are separated in April.

The split is part of government plans to privatise Royal Mail, which had prompted fears that the Post Office could lose its contract to sell stamps and deliver parcels, threatening its financial viability.

However, this deal will offer local employers the confidence to invest in their businesses and staff.

Postal Affairs Minister Edward Davey said: “On coming to office, we found a demoralised Post Office, still losing substantial sums despite years of cutbacks and closures. So a year ago I set out a radical plan to transform Post Office’s future, with £1.34 billion of government support and investment but without any closure programmes. Since then the Post Office has made good progress to become more competitive, building on its strengths.

“While it will take several years to turn round the Post Office’s finances, it’s increasingly clear the reforms are beginning to work. Concerns people had about the Post Office becoming independent from Royal Mail were always misplaced as that separation is part of our cure, but the ten year deal struck between Royal Mail and the Post Office will give subpostmasters and others greater confidence.”

The Post Office has also won new contracts with UKBA and Westminster Borough, which will increase income.

The National Federation of SubPostmasters (NFSP) has welcomed the deal which it called “essential for the future wellbeing of our post offices”.

George Thomson, NFSP general secretary, said: “Subpostmasters will welcome the security which this news provides, which will help provide them with the confidence necessary to invest in their businesses for the future.”

He explained that income from Royal Mail services makes up a third of subpostmasters’ and Post Office income and urged the government to offer even more of its services through them.

Commenting on the separation of the two organisations, Billy Hayes, CWU general secretary, said: “Ed Davey's optimism is of course welcome, but we think it is too early to claim success for an initiative which is untested, unprecedented in global postal industries and which has many uncertainties ahead – mutualisation, for example.”

He also said the future of the Post Office was “less than clear” claiming that the new contracts won will not replace the value of contracts lost such as the 'Green Giro' benefit payment contract which ends this year.

The organisations will separate on April 1st this year but the privatisation of Royal Mail is unlikely to happen this year, a government spokesman confirmed.

He explained that key conditions such as modernising the organisation and putting a new regulatory regime in place must be met first. The government has also applied for European state aid to clear the organisation’s pension liabilities and once this is complete, a buyer must be found.