The UK’s Royal Mail has been kicked in its small packages by Amazon setting up its own delivery service.

Royal Mail has warned that growing competition from Amazon will hit its UK parcels business, as it reported a 21% fall in first-half profits for the postal group.

The 500-year-old postal service, which was privatised last October, said operating profits before transformation costs fell to £279m in the six months to 28 September.

Royal Mail complained that Amazon’s own delivery service is cutting the annual rate of growth in the UK parcels market to 1-2 per cent for the next two years. This is half the 4 per cent growth expected for this year.

Last month, Amazon launched a same-day delivery service which allows customers to collect items from local newsagents and high street shops, through a tie-up with the distribution group Smiths News.

Pricing pressures pushed Royal Mail’s UK parcels revenues down 1 per cent  to £1.5bn in the first half, while volumes grew 2 per cent.

UK letter revenues rose 1 per cent to £2.2bn, thanks to price increases and electoral mailings, while volumes dropped 3 per cent. Overall group revenues rose 2 per cent to £4.5bn.