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Over 300 local post offices are under threat after supermarket giant Tesco buys convenience store operator T&S stores, and hundreds more could face closure as the convenience store industry consolidates.

The T&S portfolio includes the Dillons, Day & Nite and One-Stop chains, and contains 329 small post offices, already an endangered species across the country.

Royal Mail may be allowed to increase the price of postage by more than the rate of inflation after the government admitted that the troubled state-owned company risked going into administration in the face of increasing competition.

Postcomm, the postal regulator, is expected to approve a 1p increase in the price of both first and second class stamps by the end of January. But insiders hinted yesterday it could drop controversial plans to cap future rises at 2.5 per cent, the forecast level of retail price inflation.

Royal Mail said yesterday it could “not rule out” administration as a “hypothetical worst case” scenario if there wasn’t a satisfactory way agreed to finance the company.

The comment came in response to reports that Royal Mail – which is losing pounds 1.1m a day – could be “forced into administration” unless it was allowed to raise stamp prices.

A Royal Mail spokesman however stressed that, while he could not rule it out, it was a hypothetical situation.

The company is currently awaiting a decision from the post regulator, Postcomm, on future price rises.

Royal Mail may be forced into administration unless it is allowed to raise stamp prices, the Government has admitted.

The stark warning is contained in a Department of Trade and Industry report sent to the postal regulator Postcomm late in December.

The DTI, which is the sole shareholder in Royal Mail, warns that if Postcomm rejects requests for an increase in prices then Royal Mail won’t be able to pay back three government loans worth more than pounds 1bn.

A £15million fund has been set up to help keep open post offices in some of Britain’s most deprived urban areas.

Up to £50,000 will be offered to sub-postmasters at nearly 400 locations.