Online retailers face a steep rise in delivery costs because the current model is unsustainable for fulfilment firms, according to the boss of one of the UK’s largest distribution firms.

Jonathan Smith, chief executive of Yodel – which is owned by billionaire brothers Sir David and Sir Frederick Barclay – has warned that despite steep growth in the channel, delivery providers do not make any money, meaning service is affected.

He said Yodel, formed after DHL Domestic merged with Home Delivery Network, will renegotiate terms with retailers. Some may see double-digit percentage increases.

Smith said: “The growth in online has come at the expense of delivery providers. We have to do something different.” Smith said consumers’ natural resistance to pay for delivery is part of the problem.

Yodel, which works with retailers including Amazon, will offer an improved service with guarantees and penalties for late delivery, in return for higher fees.

It will also provide seven-day delivery over Christmas. The unprofitable parcel firm was criticised last Christmas despite delivering more than 99% of orders.

Yodel has 25% market share in deliveries to the home.