The firm said it would try to mitigate the costs through “price increases and growth initiatives”.

Earlier this year, the firm hiked first class stamp prices by 10p to 95p and second class stamps by 2p to 68p.

The warning comes after Royal Mail warned it was facing “significant headwinds” from rising costs.

It said it will need to cut costs more as a result, increasing its target to over £350m from £290m previously.

A spokeswoman said: “We haven’t made decisions on future prices, but we always carefully consider the impact on our customers and ensure that any changes help to secure the sustainability of the Universal Service.”

Royal Mail said it was also continuing to change the business to cope better as its parcel business becomes more important than letter delivery.

Letter volumes have fallen by more than 60% since their peak in 2004-05 and by about 20% since the pandemic began. Meanwhile, parcel deliveries increased during the pandemic.

Simon Thompson, chief executive of Royal Mail, said: “As we emerge from the pandemic, the need to accelerate the transformation of our business, particularly in delivery, has become more urgent.

“Our future is as a parcels business, so we need to adapt old ways of working designed for letters and do it much more quickly to a world increasingly dominated by parcels.”

Mr Thompson said that the focus would now be to “work at pace” with staff and trade unions to “reinvent this British icon for the next generations”, give customers “what they want” grow the business sustainably and “deliver long-term job security”.

The price hike warning came as the business reported an 8.8% drop in pre-tax profit to £662m for the year to the end of March.

Royal Mail is also facing an ongoing pay dispute with its largest labour union.

In January it said around 700 management roles would be cut. The company also axed a fifth of its managers – around 2,000 posts – in June 2020, shortly after the start of the pandemic.