Palmer & Harvey: How many jobs are at risk from the supplier going into administration?

What is Palmer & Harvey? Why is it so important? How many jobs might be at risk and what might the impact of a bankruptcy be on big supermarkets this Christmas?

Palmer & Harvey is the UK’s leading supplier of tobacco (Reuters)

Britain’s biggest tobacco supplier, Palmer & Harvey, is understood to be teetering on the brink of administration.

We take a look at what the company actually does, how many jobs are at risk, and what the wider implications of a bankruptcy might be.

What is Palmer & Harvey and why is it so important?

As well as being the UK’s leading supplier of tobacco, Palmer & Harvey, founded back in 1925, is also the country’s biggest delivered wholesaler.

It’s a hugely important supplier to Britain’s largest supermarkets, including Tesco and Sainsbury’s, but it also services smaller retail outlets, corner shops and convenience stores right across the country, from petrol stations like Esso and Shell, to Costcutter, Welcome Break, Martin McColl and Moto.

Overall has a network of 14 local depots across the UK and operates a fleet of more than 1,000 vehicles, making around 6,000 deliveries every day – that works out at around eight every minute.

What went wrong?

On Tuesday, sources familiar with P&H told The Independent that the company was nearing administration. One source said that it had already filed a notice of its intention to appoint administrators to the court and that professional services firm PwC was likely to handle an administration.

For some weeks it had been in exclusive takeover talks with private equity firm Carlyle, but Sky News on Tuesday reported that P&H had been hit by a “working capital problem”.

A deal with Carlyle was reportedly conditional upon cigarette companies Imperial and Japan Tobacco rolling over outstanding loans and providing additional funding. But the company’s financial situation apparently meant that those terms could no longer be stuck to.

One person said that P&H had been struggling with difficult finances for the best part of a decade.

How many jobs might be at risk?

P&H employs a total of around 4,000 people and theoretically all of those jobs could be on the line if the company does indeed go into administration.

One source familiar with the situation said that some assets could be bought, which may save some jobs, but a so-called pre-packaged administration – where a company agrees to sell some or all of its assets before actually going into administration – looks unlikely at this stage.

What impact could an administration have on the wider industry?

The sheer size and scale of P&H means that the implications of an administration could be significant for the wider retail industry, especially as this time of year tends to be particularly busy for the sector.

It supplies around 90,000 retail outlets across the UK. Sky News on Tuesday said that if P&H can’t keep operating, that could spell “chaos” for some parts of the UK's grocery retail industry.

P&H reportedly supplies tobacco products to every Tesco outlet in the country but Sky also reported that tobacco companies were understood to have lined up contingency plans to deal with a failure of P&H.