Staff at Palmer & Harvey’s County Durham base are being made redundant following the 90-year-old company’s fall into administration.

Officials yesterday confirmed to The Northern Echo that 35 staff from the wholesaler’s depot in Birtley, near Chester-le-Street, will lose their jobs.

A further 17 will be retained, with administrator PWC revealing those staff will help with “managing the activities of the business to an orderly closure”.

Palmer & Harvey, which is laying off around 2,500 people nationally, collapsed after efforts to revive its fortunes were compounded by cash flow pressures brought on by tough trading conditions.

The group had entered exclusive takeover talks with the Carlyle Group, but the US private equity fund’s offer of significant capital investment, in exchange for a controlling stake, did not progress.

Matthew Callaghan, joint administrator and PWC partner, said: “The group faced a challenging trading environment and the need for significant restructuring has been recognised for some while.

“The directors concluded there was no longer any reasonable prospect of a sale and had no choice but to appoint administrators.

“Our priority is to ensure all employees made redundant are assisted in processing their claims with immediate effect.”

Mr Callaghan revealed workers have been paid their November salaries, following support from creditors, adding PWC is seeking buyers for the group’s Sweetdirect, Snacksdirect and Direct Van Sales operations.

Prior to its administration, Palmer & Harvey was known as the UK’s largest supplier of cigarettes and provided alcohol, groceries and frozen food to 90,000 retail accounts, including Tesco.

In the wake of its failure, convenience store chain Costcutter has struck a wholesale supply deal with the Co-operative Group.

The firm, which owns Mace, Simply Fresh, Kwiksave and SuperShop, said the Co-op will start supplying its 2,200-strong store network from next spring.

The move will also see the Coop offer immediate support to Costcutter, while handing its chain of stores the chance to become Co-op franchises.

Darcy Willson-Rymer, Costcutter chief executive, added: “With Palmer & Harvey no longer able to supply our stores, we have activated our contingency plans.”

The agreement hands further strength to the Co-op, which is pushing through the takeover of rival grocery group Nisa in a £137.5m deal.