Palmer & Harvey enters administration leaving 2,500 out of work

The wholesaler Palmer & Harvey (P&H) has entered administration after the failure of rescue talks, leaving 2,500 people out of work just weeks before Christmas.

Sky News had reported earlier on Tuesday how the company - Britain's biggest tobacco supplier - was on the verge of collapse amid a funding crisis and fading hopes of a buyout by private equity firm Carlyle.

Joint administrators at the business services firm PwC said P&H employed 3,400 people but they had needed to make immediate redundancies at its head office and in the branch network of 14 regional distribution centres.

They confirmed just 450 people were currently being kept on to assist in managing the activities of the business to an orderly closure, adding that November's salaries had been paid.

The shopworkers' union, Usdaw, said it was seeking an urgent meeting with PwC.

The demise of P&H, while devastating for workers, also risks disruption in supplies to UK stores and restaurants.

It was the country's largest delivered wholesaler to the convenience market with 90,000 customers in total, including the large supermarket chains.

Costcutter was among them. A spokesman said: "We have activated our contingency plans to provide alternative sources of supply through appropriate regional and national options."

Tobacco firm Imperial Brands (LSE: IMB.L - news) - which had lent financial support to P&H along with rivals - said that while it had contingency plans in place to mitigate supply problems it estimated a £160m hit to its own operating profits - mainly from unrecoverable excise duty.

It said: "P&H has been a long-standing trading partner in the UK and for several months Imperial has been working to find a solution that provides the business, and its employees, with a sustainable long-term future.

"Imperial was prepared to explore further alternatives but other parties have been unwilling to pursue these to a successful conclusion."

PwC explained: "The group has been by hit by challenging trading conditions in recent months and efforts to restructure the business have been unsuccessful.

"This has resulted in cash flow pressures and it has not been possible to secure additional funding to support the business."

Joint administrator Matthew Callaghan added: "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.

"The administrators are working closely with employees affected by the closure of the business to ensure they receive the support they need during this difficult time to assist with their claims for redundancy and other compensatory
payments.

"Our priority is to ensure that all employees made redundant are assisted in processing their claims with immediate effect."