Palmer & Harvey, one of the UK’s largest grocery and tobacco wholesalers, has entered into administration. The company’s pre-Christmas collapse has resulted in 2,500 redundancies in the immediate term, with up to 900 more potentially lost jobs in the near future.

P&H is one of the UK’s largest grocery and tobacco wholesalers, supplying goods to as many as 90,000 convenience stores and grocery stores throughout the country. Some of P&H’s top customers include Sainsbury’s and Tesco.

In business since 1925, Palmer & Harvey has been a significant part of the British grocery and tobacco industry for almost a century.

The company has faced financial difficulties for some time, with efforts made to strengthen the company’s finances since earlier this year. PricewaterhouseCoopers, working as administrators for P&H creditors, have pointed to poor cash flow as the primary reason for the collapse.

Other reasons for the administration include unsuccessful efforts to bring in outside financing to  fuel the company’s operations. P&H’s collapse comes shortly before the Christmas season — a major retail and grocery shopping period.

Many of P&H’s top customers have contingencies in place after the company’s collapse, with Sainsbury’s and Costcutter already announcing contingency plans to ensure certain products remain in stock.

However, the business’s entrance into administration means that there could potentially be short term shortages of some products supplied by P&H in UK convenience and grocery stores, such as cigarettes.

Prior to administration, P&H employed almost 4,000 people around the UK. The business was the UK’s top supplier of tobacco products, responsible for a large part of brands such as Japan Tobacco International and Imperial Brands’ products supply chain in the UK.

The company had reportedly hoped for a financial restructuring from companies in the tobacco industry, many of whom have previously relied on P&H for wholesale distribution in the UK. As of November 29, however, the company has formally entered into administration.

P&H isn’t the only wholesale grocery company in the UK to face financial difficulties. Brands such as Costcutter are also reportedly under pressure, with weak UK consumer spending a major threat to many retail businesses.

New data from the Office for National Statistics shows that UK household spending growth had slowed to 0.1% in the three months to June. The rate of growth is the slowest on record since the last quarter of 2014.

Weak wage growth has also affected UK retail spending habits, with consumer spending less and household budgets under squeeze.

Earlier this year, P&H entered into talks with several of its top customers, including a proposed extension to existing deals with Tesco that would extend P&H’s contract with the supermarket giant to five years.

However, with the company’s financial collapse, the future of both its confirmed and proposed agreements with customers such as Tesco and Sainsbury’s remains uncertain, as do the 900 jobs that could potentially be lost over the coming months.

Elliot Preece