Northern Foods has announced plans to close its Morrisons ready meal factory in Hull, with the potential loss of 349 jobs.

However, CEO Stefan Barden revealed that these losses could be offset by the reopening of its Fenland Foods factory, mothballed last May when the company pulled out of its £45m Italian ready meals contract with Marks & Spencer.

Barden said he was "80% sure" that by this time next year Northern would be able to provide "a news update" on the Fenland facility. "We are still planning to reopen Fenland Foods, and have a raft of ideas planned - probably focusing on chilled ready meals - with a new retailer customer."

Northern had been in negotiations with Morrisons since the retailer put its traditional ready meals contract out to tender earlier this year. It had decided to close its £30m-turnover Cavaghan & Gray factory after failing to agree terms, said Barden.

"The Hull plant is at a crossroads. It needs a major overhaul if it's going to be a factory for the future and requires volumes and investment," he said.

"Unfortunately, we have never been able to square the circle with Morrisons and simply haven't been able to agree terms. For the sort of margins we'd have to put into it, we weren't getting the required terms."

Barden added that he thought Morrisons had found "a better deal elsewhere in the industry" and was disappointed with the outcome, but was working closely with employees to secure positions elsewhere.

Northern said it would take a £5m hit to close the site through restructuring costs but claimed there would be no profit impact on the end-of-year results.

A Morrisons spokesman said the retailer had enjoyed a longstanding relationship with Northern in many other grocery category areas.

"Northern's decision to propose closure of its Hull site is, of course, sad news for all people affected," he added.

The news came as Northern announced full-year group sales growth of 4.6% to £975.2m.