Postal firm Whistl has suspended deliveries after private equity backer LDC pulled out of funding to help expand the business.
The Dutch-owned company - formerly known as TNT - said it was now reviewing the viability of rolling out its delivery service from the areas where it currently operates.
Whistl employs around 2,000 workers on its postal delivery business in parts of London, Liverpool and Manchester in direct competition to the Royal Mail.
It started trialling home deliveries three years ago, equipping its staff with bright orange uniforms for the so-called end to end (e2e) deliveries.
A company statement said: "Following the announcement from LDC that it would not proceed with the proposed investment to fund further rollout of e2e, we have now commenced an extensive review of the viability and potential for the rollout of an e2e postal delivery service in the UK.
"To stem the losses from the operations we have taken the difficult decision to suspend the current e2e service during the review process and all mail will now be delivered through our long-standing downstream access service until we have concluded the review.
In a letter to staff, Whistl chief executive Nick Wells said the decision to suspend deliveries had been taken to stem losses.
"As a result of this I regret to inform you that your position is 'at risk' of redundancy. I state 'at risk' because no final decisions will be made until full consultation has taken place."
Mr Wells said the company intended to carry out a "full and effective" consultation, with workers represented by their union, Community.
Staff were told that Whistl was looking at options to secure its longer-term financial viability.
Workers will be paid their normal rate for the rest of the week but will not be paid while the consultation is held.
A Royal Mail spokesman said: "As the universal service provider, Royal Mail is ready to accept the additional volumes into our network and we will ensure delivery meets our usual high standard of service. We are liaising with Whistl to make certain customers aren't impacted in any way."
Les Bayliss, national officer at Community, said: "Understandably, our members are extremely concerned and worried for their futures. Community has a meeting of our senior reps tomorrow where we will begin to develop our response to the company's consultation.
"We will be doing all we can to identify a viable way forward for the business that safeguards our members' jobs. We should be clear that this is a suspension of the business not a termination of it, so we will be looking for the company to work with us to identify sustainable options to continue operations as soon as practically possible.
"Meetings will be taking place through the week with our local reps in the end-to-end areas of the business as we seek to listen to members' concerns and begin to identify alternatives.
"We understand the consultation was triggered by the decision of LDC not to fund a further rollout of the end-to-end business but we're also aware of the challenges faced by the business because of the continuing costs dictated by Royal Mail, which affect the sector as a whole."
Dave Ward, general secretary-elect of the Communication Workers Union, said: "Our first reaction to this news is concern for the workers who have lost their jobs. This is of course a difficult time for them and their families and coming less than six months after City Link folded, is the most recent effect of a crowded post and logistics market.
"Ofcom needs to pay attention to the impact of competition in the postal market which is not only causing job losses but playing a leading role in driving terms and conditions downwards.
"The sad truth is if Whistl had been successful then it would have been at the expense of even more job losses in Royal Mail and the end of six-day-a-week deliveries to 29 million UK addresses.
"Ofcom must understand that promoting this model of competition in a declining letters market does not benefit workers, business or the public."
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