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Thousands of jobs may be axed at the postal services group Consignia in a swingeing cost cutting programme condemned last night by unions as a policy of “slash and burn”.

Around one in 10 jobs could disappear in some areas of the Royal Mail and Post Office organisation in plans to cut costs by pounds 1.2bn over the next 18 months. Capital spending programmes are expected to be cut and some parts of the business could be hived off to private companies.

Other savings under consideration include scrapping second deliveries which carry only a small amount of mail but are relatively expensive.

Consignia, formerly the Post Office, said it needed to make the cuts – equivalent to 15% of its total costs – to improve efficiency in the face of new commercial pressures in Britain’s postal services.

As managers began briefing staff about the proposals yesterday morning, the state owned group insisted that no decision had yet been taken on the overall level of job losses.

But the cost cutting exercise, applauded by Postwatch, the consumer watchdog, drew a withering response from Post Office unions which have pledged to fight a “cack handed, panic measure”.

Strike action has not been ruled out. John Keggie, deputy general secretary of the Communication Workers Union, said the government had to ask how a business that was profitable for 20 years before commercial freedom was granted was now in such a financial mess.

“Blaming efficiency levels and the workforce is just not on,” he said last night. “The measures being proposed by the Consignia board can only be described as a ‘slash and burn’ policy. Any attempts to outsource parts of the industry into private hands or to introduce compulsory redundancy will be vigorously opposed.”