Whistl, a private postal service formerly known as TNT, has suspended door-to-door deliveries in London, Liverpool and Manchester.
According to the BBC, this latest move follows a decision in March by potential investment partner LDC not to fund the company's expansion plans.
Whistl assured customers that outstanding deliveries would continue onwards – but they would revert back to using Royal Mail for the "final mile".
In a statement, the company explained: "To stem the losses from the operations we have taken the difficult decision to suspend the current e2e service during the review process and all mail will now delivered through our long-standing downstream access service until we have concluded the review."
2,000 employees at risk of redundancy
As part of the move, Whistl is consulting 2,0000 employers on redundancy.
Chief executive Nick Wells wrote in a letter to staff that the decision to suspend deliveries had been taken to reduce losses.
"As a result of this, I regret to inform you that your position is 'at risk' of redundancy. I state 'at risk' because no final decisions will be made until full consultation has taken place," he said.
Whistl will be carrying out a full consultation and workers will be represented by their union, Community.
"Understandably, our members are extremely concerned and worried for their futures," said Lee Bayliss, national officer at Community. Workers will be paid their normal rate for the rest of the week, but will not be paid during the consultation.
Whistl acts as a direct competitor to Royal Mail and shares in Royal Mail rose 3.3 per cent after the announcement.
A Royal Mail spokesman told the Guardian that they were ready to deal with any additional volumes.
"As the universal service provider, Royal Mail is ready to accept the additional volumes into our network and we will ensure delivery meets our usual high standard of service.
"We are liaising with Whistl to make sure certain customers aren't impacted in any way," he added.