The government must decide what it wants from the Post Office network if the UK's 14,000 post offices are to survive much longer, a new report has warned.
Industry regulator Postcomm claims post offices lost £111 million last year, despite the £150 million annual subsidy for rural branches, and says the situation looks bleak.
A key problem is the withdrawal of government services from the Post Office network - the revenue from government transactions has fallen by £168 million over the last year.
The network has lost the contract to issue TV licences and the situation will be made worse when Post Office account cards, which allow people to collect their benefits in a bank account and provide valuable income for branches, are withdrawn in 2010.
Some new products have been introduced, such as investment bonds, personal loans and credit cards, but these make up less than one per cent of total sales in urban areas. Rural post offices are in the most trouble, with only 1,500 of the 8,000 making money.
"The government must decide what it wants from the Post Office network and plan for its long-term sustainability," said Postcomm chairman Nigel Stapleton.
"The network needs a clear vision and consultation is needed at national and local level taking into account the plans for regions as a whole."
Robert Gray, director of campaigns at the Countryside Alliance, warned that post offices were "facing death by 1,000 cuts", saying that its failure to take action amounted to a programme of "closure by default".
"The value of the Post Office network cannot be measured simply in financial terms. The social impact of closures on many communities, especially those in marginal rural areas, would be enormous," he said.
Shadow Post Office minister Charles Hendry urged the government to take action and draw up a new strategy for the network, which included giving them security through being able to bid for new business.
Liberal Democrat trade and industry spokesman Ed Davey said the "do-nothing Labour ministers" should be shamed into action by their "acts of vandalism" against the Post Office network.
"With over 5,000 post offices in danger of closing according to Postcomm's figures, we now have a crisis of unprecedented proportions. The Liberal Democrats will be leading the parliamentary campaign to call for action before it is too late," he said.