A false alarm on horsemeat contamination from the Food Standards Agency has caused losses of up to £250,000 for Welsh fast food supplier The Burger Manufacturing Company and its parent company, Sparks Catering Butchers, it has said.

The FSA issued an alert on 21 February saying three samples of BMC’s burgers had tested positive for “at least 1% horsemeat” in tests conducted by Powys County Council. BMC withdrew the products in response.

But on 22 March, the FSA updated its statement from February, and said subsequent tests on BMC’s products had shown they actually contained less than 1% horse DNA. According to guidelines agreed by the FSA with the industry, test results below 1% are not being reported as positive because of concerns about testing reliability and possible minor cross-contamination.

In a statement issued through sales and marketing manager Mark Cornall today, BMC said it – together with its parent company – had suffered “considerable damage” as a result of the false alarm. “Losses could potentially be in the region of £250,000, and we are working with our customer base to limit the damage going forward,” it added.

Although its products had been cleared, there was concern reputational damage could be permanent, BMC said. “As a customer pointed out only yesterday, it is irrelevant that you have now been cleared as the damage has already been done,” it said.

“Ultimately, once the dust settles and the businesses are back to where they were previously, there are serious questions that need addressing and this will be pursued at the right time,” BMC added.

The FSA said: “We had no reason to doubt the initial screening test results from the public analyst, which indicated the presence of horsemeat in the burgers sampled was at a level above 1%. In the rare case that a screening result is subsequently quantified at less than 1%, we will clarify the situation publicly, as we have done in this case.”

When the FSA issued its statement back in February, BMC said it had traced the meat for the burgers back to Farmbox Meats, the Welsh company that was raided and suspended by the FSA last month and where two arrests in connection with the horsemeat investigations were made.

On 18 March, the FSA said it had conditionally lifted the suspension on Farmbox Meats, with a further review to take place on 5 April.

Yesterday the FSA revealed that it would not name five products that had tested positive for horse or pork DNA as the results were being disputed.

The horsemeat scandal has put the reliability of DNA testing on meat under the spotlight, as some food suppliers have had their products test both negative and positive for contamination in different checks.

Analysis: How reliable is DNA testing in the wake of fresh horsemeat revelations?