Icelandic manufacturer Bakkavor Group has announced plans to axe its factory in Grimsby in a move that could lead to the loss of more than 500 jobs.

Bakkavor said its Mariner Foods plant, which it acquired in 2001 and makes a range of soups and ready meals for clients including Tesco, was making “unsustainable losses”.

The site will now be the subject of a 90-day consultation and although closure is the most likely option, workers may be offered roles at alternative sites in the UK.

“Uncertain consumer demand on top of the rise in inflationary costs has resulted in Bakkavor having to consider making changes to align its cost base,” a spokesman for the group said. “Over the last year, the food industry has experienced sustained levels of unprecedented inflation. Mariner Foods has not been exempt from these pressures and consequently is experiencing continued unsustainable losses.”

He added: “This is a very difficult time for all of the staff involved and we are focused on keeping them appropriately updated throughout this consultation process. The closure of the site is the most viable option; however, we will consider all alternatives.”

The news comes with a number of major Icelandic companies experiencing financial difficulties related to the collapse of the country’s banking system. Conglomerate Baugur is set for a fire-sale of its UK high street portfolio, which includes House of Fraser and frozen food specialist Iceland.