Royal Mail proposes higher pay deal to appease largest union

(Reuters) - Britain's Royal Mail <RMG.L> has proposed a 6% pay rise as part of a three-year deal with the Communication Workers Union (CWU), as the former postal monopoly looks to appease its largest union following threats of another strike ballot.

Shares in the company had climbed 5% by 1525 GMT after it said the new deal brings the total pay increase to more than 16% between April 2018 and March 2023, the five-year period covered under its initial agreement with the CWU.

The company had been hampered by the threat of strike action over the Christmas period, and this month said the CWU was preparing for another strike ballot.

CWU did not immediately respond to a request for comment on Royal Mail's statement on Thursday.

Royal Mail, which employs about 143,000 people in the UK, said this month that it faced a challenging year and could face a loss in its British business because of labour tensions and shrinking letter volumes.

The company also said it will introduce a second daily van delivery service in most parts of the country to respond to demand created by late night online shopping.

Chief Executive Rico Back has pledged to invest 1.8 billion pounds in a five-year turnaround plan to refashion Royal Mail into an international parcel-led business as fewer letters are sent.

(Reporting by Pushkala Aripaka and; Samantha Machado in Bengaluru; Editing by Shinjini Ganguli and Keith Weir)