Marks & Spencer has ended its cake contract with 2 Sisters Food Group-owned Avana Bakeries and given the business to Park Cakes, as part of a strategic review of its supplier base.

The decision puts the 650 workers at Avana Bakeries, which is based in Newport, at risk of redundancy because the vast majority of what it produces is for M&S.

Avana said there was also a risk the site could be closed. It is now entering a 45-day consultation as it considers next steps.

“Clearly this is a huge setback to our cakes business and our operations in Wales, but we are determined to work hard to reverse the situation,” said Avana in a statement.

“As a matter of urgency, we are now making every effort to rebuild the business by seeking alternative customers and opportunities which will minimise the impact of this contract loss.”

Apart from the M&S contract, the Newport site also makes Christmas cakes and hampers, as well as a small amount of product under the Mr Kipling brand.

The contract will be transferred to Park Cakes in Oldham, which is already a major M&S supplier.

M&S said the decision was part of a broader strategic review.

“As part of our work to further improve the quality of our food supply chain, we are consolidating some of our fresh desserts and cakes business and moving from two suppliers to one,” it said.

“It’s not a decision we’ve taken lightly and understand that it will have a significant impact for Avana Bakeries. We’ll do all we can to support the supplier through the process”

Last year, The Grocer revealed that M&S was putting contracts under review. It ranked food and drink suppliers under four headings: strategic, core, nurture and review.

The retailer warned suppliers at a conference in May that M&S would work with ‘review’ suppliers to try to address issues and get them into growth, and if that failed, “manage their exit.”

M&S then warned suppliers in October that it planned to redistribute £500m worth of business over the next year.