Royal Mail's loss of big contracts was a "great concern", ministers warned yesterday as they rejected the postal operator's proposal for an employee shares scheme.

Alistair Darling, the trade and industry secretary, said Royal Mail's plan to give its 200,000 staff a 20 per cent equity stake would be too costly. "The biggest thing in my mind is the cost of it," he told the Commons trade and industry committee. The legislation needed would also be difficult to get through parliament given that many Labour MPs oppose what they see as a backdoor route to privatisation.