Royal Mail has said it will need to rise prices and cut costs in the face of soaring inflation.

The company warned that it sees “significant headwinds” from rising costs including wages, energy and fuel.

Royal Mail revealed that it aimed to make cost savings of £350m over the course of its current financial year in an attempt to bolster its position but did not say whether that plan would place jobs under threat.

Inflation is on the march across the UK economy.

The consumer price index hit its highest level in 40 years in April, it was announced on Wednesday, as the cost of living crisis deteriorated.

Royal Mail has already hiked the cost of posting letters by an average of around 7%, and parcel prices by an average of about 4%.

But it sees numerous threats from rising costs ahead, including the failure to agree a pay deal with the Communication Workers Union (CWU) which is opposing measures the company wants to implement as part of its transformation programme towards a parcel-focused business.

The union said it was seeking a “no strings attached pay rise” for Royal Mail staff on the grounds the company could afford it after posting adjusted operating profits of £758m for the year to 27 March.

Shares fell by more than 7% at the market open amid a growing inflation-focused sell-off globally.

Royal Mail said in its results statement: “We are now at a crossroads. We need to deliver the benefits from change more quickly to deliver sustainable growth.

“We have made significant operational change already, but this needs to translate into real efficiency savings which deliver a financial benefit next year and beyond.

“Delivery of our existing agreements and the successful transition into the next agreements, as part of the current negotiations with the CWU, will be key to future profitable growth.

“We have made a substantial pay offer to our people which will enable the change we need to remain competitive, grow and secure their jobs for the future. Our market is changing quickly, and agility in our response is key.”

Simon Thompson, Royal Mail’s chief executive, added: “As we emerge from the pandemic, the need to accelerate the transformation of our business, particularly in delivery, has become more urgent.

“Our future is as a parcels business, so we need to adapt old ways of working designed for letters and do it much more quickly to a world increasingly dominated by parcels.”

He added: “Our focus now is to work at pace with our people and our trade unions to reinvent this British icon for the next generations, so that we can give our customers what they want, grow our business sustainably and deliver long-term job security for our great team.

“We have no time to waste.”