Part-privatisation of the Royal Mail will not go ahead as planned because of the depressed state of the economy, Business Secretary Lord Mandelson has announced.
Lord Mandelson told the House of Lords that there was "no prospect" of the sale going ahead in the current economic circumstances.
A delay in the controversial sell-off, which is opposed by many Labour MPs, had been expected after Lord Mandelson said on Monday his Postal Services Bill was being "jostled" for space in the legislative programme.
He told peers that the state of the economy made it "impossible" to obtain value for money for the taxpayer.
But he claimed: "When market conditions change, we will return to the issue."
Ministers had argued that private sector money was needed to secure the future of the Royal Mail, which is facing a pension deficit of up to £8 billion.
They hoped to find a private partner willing to take a stake in the company to fund much-needed modernisation. But the plan ran into difficulties when the main suitor, Dutch postal operator TNT, indicated that its interest was cooling over the valuation put on Royal Mail.
Meanwhile, ministers faced bitter opposition from the Communications Workers Union (CWU), which threatened to vote on disaffiliation from the Labour Party.
And Prime Minister Gordon Brown was facing the prospect of large-scale rebellion at the second reading of the Postal Services Bill in the Commons after 150 of the party's backbench MPs signed a parliamentary motion opposing the sell-off.
CWU general secretary Billy Hayes said: "The Government has not only looked at market forces but has listened to the British public. Privatisation was a deeply unpopular suggestion from day one."
