Union leaders say postal staff are shocked and dismayed at the proposed closure of Leicester's main Royal Mail sorting office.
The company says that, following a consultation with the Communication Workers Union (CWU) and Unite, it wants to reduce the number of distribution centres in the Midlands from seven to four.
Under the plans, Leicester's Meridian sorting office would be axed – meaning more than 500 staff would either lose their jobs or be relocated.
It also means Leicestershire's mail would be processed in Northampton and would have to be transported 35 miles up the M1 before it is delivered to distribution centres such as the city's Campbell Street office.
CWU representative and Westcotes ward city councillor Andy Connelly said: "The staff are shocked and dismayed.
"We expected some of the jobs to go from the Leicester mail centre, but we didn't expect the centre to close in its entirety.
"We don't see how the Royal Mail are physically going to be able to do all the work from one centre in Northampton."
The union said that placing Leicester's main sorting office in the south Midlands would result in later deliveries.
Unite and the CWU now have two weeks to respond to the Royal Mail's proposals.
Glynn McAllistair, spokesman for the CWU, said: "We don't want to put people through unnecessary upheaval and our counter-proposals will reflect that.
"The internal review explains they want four mail centres – one of which is not Leicester.
"Leicester's mail centre would close completely, meaning there will be 500 jobs fewer in Leicester than there currently are.
"We are in talks with Royal Mail and once we've submitted our proposals we'll await their views."
Following the counter-proposal from the unions, Royal Mail will hold another 90-day consultation – which will end in about mid-September.
A final decision on the future of the seven mail centres will then be announced.
The restructuring comes as the Royal Mail said the number of items being posted in the Midlands had fallen by more than 400 million since 2006. It said by 2015 there will be less than half the volume of mail compared with 10 years ago.
A spokesman said: "Royal Mail must review its mail processing operations in the region and is undertaking a modernisation programme, aimed at ensuring a successful future for the letters and parcels business.
"Our initial view is to have four mail centres for the Midlands, Birmingham, North West Midlands (Wolverhampton), Nottingham and south Midlands (Northampton)."
Under the proposals, centres in Derby and Worcester would also close.
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