Northern Foods said jobs may go at its Fenland Foods site after cancelling a contract to supply Marks & Spencer with ready meals.

The Fenland plant made chilled ready meals for the retailer, generating annual sales of £45 million, but failed to make a profit for the company in the year ending March 29th, 2008.

After negotiations with M&S, Northern Foods decided not to continue with the contract and says it will ‘mothball’ the Lincolnshire site, which employs 730 people, from August 2008.

The group, which also makes Fox’s biscuits and Goodfella’s pizzas, said it would look for another customer before continuing production at the site.

Chief executive Stefan Barden said: “The Fenland facility would remain mothballed whilst we explore opportunities to secure profitable new business with other customers for the site.

“We have plans to invest in the site so that it can continue to be a leader in its market. Our immediate task is to support our loyal employees through the consultation period.”

A spokesperson for Northern Foods confirmed that although there were no job cuts planned at this stage, it is possible that the entire staff could be made redundant.

Northern Foods said there would be a one-off cash restructuring cost relating to the proposal, but the suspension of operations would not materially impact pre-tax profit.

At March 29th 2008, the site had a net book value of £24 million, Northern Foods added.