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The Royal Mail is to face an inquiry by the European Commission into government funding of the company.

Complaints made by rival postal services regarding the £2.6 billion in government funding given to the company over the past six years are being taken "very seriously" by the competition commissioner.

As part of the investigation, four cases of government funding will be examined including the placing of £850 million in an "escrow account" to reduce the pensions contributions which Royal Mail needs to make to address the current deficit in its pension fund. Three loans totalling £1.8 billion will also be looked into.

According to the commission "provision of funding on terms which would be acceptable to a private investor operating in a market economy are not considered to be state aid" and the UK authorities say the funding to Royal Mail comply to the definition.

EU competition commissioner Neelie Kroes said: "The postal sector is increasingly open to competition and it is important to reassure competitors that the advantages of that opening are not neutralised by illegal state subsidies."

"The commission will also make sure that any necessary financing intended to compensate the provision of the public service is not called into question."

Ms Kroes added: "We will look at each of the UK's measures carefully to see whether what they have done represents state aid and whether they have a lawful or unlawful purpose."