Northern Foods is considering closing its Cavaghan & Gray factory in Hull, affecting 349 jobs.

The food manufacturer said the site was no longer viable after losing a ready meals contract for Morrisons.

"The loss of this contract makes the site commercially unviable. We are today announcing a proposal to cease production and close the site," said CEO Stefan Barden.

"We do not take this decision lightly and fully recognise and regret the uncertainty this will bring to our loyal employees.

"Our immediate task is to support our staff through the consultation period at this difficult time."

Northern Foods yesterday reported a 5.2% drop in full-year pre-tax profits to £47.5m, against sales up 4.6% to £975.2m.