Jobs shock as 2,500 staff made redundant at Palmer and Harvey

The 90-year-old firm, which has a base in Millfield Lane, Haydock, has appointed PwC as administrators after "challenging trading conditions" heaped pressure on its cash flow and efforts to revive the business failed to take hold.

The group entered exclusive takeover talks with the Carlyle Group in October, but the US private equity fund's offer of a significant capital investment in exchange for a controlling stake did not progress.

P&H, the UK's biggest supplier of cigarettes, employs about 3,400 people and provides alcohol, groceries and frozen food to 90,000 retail accounts, including Tesco.

PwC said there would be 2,500 immediate redundancies at the firm's head office and branch network, with 900 staff remaining at risk.

Matthew Callaghan, joint administrator and PwC partner, said: "This is a devastating blow for everyone who has been involved in the business.

"The administration team will focus on working with employees, clients and suppliers to facilitate a smooth and effective wind-down or transfer of operations over the next few weeks.

"The P&H Group has faced a challenging trading environment, and the need for significant restructuring has been recognised for some while.

"The company has insufficient cash resources to continue to trade beyond the short term and the directors have concluded that there is no longer any reasonable prospect of a sale."Therefore, the directors have had no choice but appoint administrators."

P&H had been working with stakeholders Imperial Brands and Japan Tobacco International as it searched for relief from thin profit margins and a substantial debt burden.

Palmer & Harvey customer Costcutter Supermarkets Group has confirmed that it is looking to other suppliers in the wake of the company's collapse.A spokesman for Costcutter Supermarkets Group said: "We have activated our contingency plans to provide alternative sources of supply through appropriate regional and national options."

A spokesman at Japan Tobacco International (JTI) said: "JTI can confirm it was informed today that Palmer & Harvey had unfortunately entered administration.

"Throughout the whole process JTI has worked continuously to facilitate a constructive solution to the P&H Group's challenges including extending significant financial and operational support to allow P&H to continue its operations.

"Regrettably our considerable efforts were not successful.

"We have a contingency plan in place and we do not expect any significant interruption in the supply of our products."

Mark Todd, national officer of the Union of Shop, Distributive and Allied Workers (Usdaw), said: "Usdaw is deeply concerned at the devastating news that Palmer & Harvey has gone into administration and that a significant number of redundancies have already been announced.

"The union is seeking an urgent meeting with the administrators to clarify what is going on and the implications for Usdaw members.

"Today's announcement is a massive shock to our members and is an extremely distressing situation for all concerned, especially in the run up to Christmas.

"We will of course be doing everything possible to protect our members' interests going forward."