Losing a mammoth distribution contract with Compass Group to Brakes has cost 3663 £100m, senior management at the company have revealed.

The disclosure was made during a meeting with trade union representatives as the foodservice wholesaler looked to explain why it could not move on a 1% pay rise it awarded to staff in July.

Company reps also said that its contract with the Ministry of Justice, which is up for renewal, faced strong competition from rivals who “would be offering at a reduced cost for the contract,” according to a report circulated to members of the GMB union.

At the meeting in December, 3663 asked the union - whose members had voted to reject the 1% raise - not to ballot for strike action.

According to the GMB, MD Alex Fisher warned that industrial action “would have a devastating effect on retaining the Ministry of Justice contract, which on top of the loss of the Compass contract, would mean job losses would have to take place”. He reportedly told the union that the potential impact to jobs would be equal to two-and-a-half depots closing. The GMB’s central executive council later decided not to hold a ballot.

Group commercial director Ian Crawford said the company was making “excellent progress” towards replacing the business.

“Having served Compass for some 15 years, we were of course disappointed that our relationship has come to an end. Nonetheless, 3663 is delighted with current business performance,” he said.