Marks & Spencer has slashed £20m a year from its contract with food distributor Gist as it continues its round of tough negotiations with logistics providers.

Gist chief executive Martin Gwynn said the new 10-year contract, worth £2bn, was good for both parties, but admitted M&S had driven a hard bargain and margin was likely to be reduced in the short term. "I think they have been tough and I'm sure we have been tough as well. But it is a long-term deal," he said.

M&S chief financial officer Ian Dyson, who has been put in charge of the new IT and supply chain modernisation drive Doing the Right Thing, said the new deal with Gist, which has handled food logistics for M&S for the past 35 years, was part of a wider round of talks.

"We have renegotiated all our contracts with logistics providers," he said.

Gist will continue the management of M&S's food supply chain in the UK and will take on new business including the food supply chain for M&S in the Republic of Ireland. The extra business was worth an additional £25m, Gwynn said.

This week, M&S revealed a 39.9% plunge in pre-tax profits to £706.2m in its full year results.