Royal Mail’s planned privatisation will go ahead with the sale of shares through an initial public offering (IPO) this year, the government has revealed.

Business secretary Vince Cable told MPs that the IPO will include both a retail offer to allow large investors and members of the public to buy shares in the operator, along with an employee share scheme.

Royal Mail employees will be allocated 10% of the shares and will be required to maintain them for at least three years. Eligible staff will also be given priority under the retail offer if they wish to buy more.

Cable said the privatisation will give it the access to capital it needs to continue with its modernisation programme.

He added that the government and Royal Mail will be working with the Communication Workers Union to come to a pay agreement, after the union rejected its latest 8.6% pay rise offer.