The business analyst forecasts that the slowdown in the UK economy could lead to the loss of 1,625 jobs in the food processing sector.

"Driving this need are two main issues - the fact that 49 businesses in the sector are showing declining sales, and also the increase in salaries as a percentage of overall costs," said David Pattison, a senior analyst at Plimsoll.

The sectors struggling at present and therefore most exposed to job cuts are food packaging and the niche food colouring market, he told FoodProductionDaily.com.

"This can be attributed to recent lifestyle changes at the top end of the market, for example the backlash against ready meals and regulation clamp downs on food colouring," he said.

The organic market could also be vulnerable, while pie manufacturers are riding a growth phased, he added.

"Surprisingly the organic market is more exposed than we would have thought given the recent boom, but our research suggests that the initial wave of growth in this market has now stabilised and the market is now increasingly competitive," he said. "Supermarkets are least exposed to job cuts and the surprise of them all is the pie manufacturers industry which is reporting increased growth and steady profitability."

For companies on the risky end of the scale, job cuts could mean the difference between survival or revival.

Salaries already account for 13 per cent of sales. But if, as expected, wages rise next year by the projected 4 per cent to an average of £19,200 (€27,539), then 45 companies will be unsustainable businesses by this point, Pattison stated in the report.

"As the market slows towards the end of 2007 and the start of 2008, companies will use the time to focus on cost," he said.

And he dismisses the strategy by some to move manufacturing capacity out of the UK to lower cost countries as an answer to the slowdown.

Moving manufacturing out of the UK is never going to be an option for the majority of UK companies, only ever for the multinationals, he told FoodProductionDaily.com.

"Moving manufacturing overseas is not the answer to cutting costs that it be hailed as given the ensuing distribution and warehousing headaches," he said. "Often, moving manufacturing abroad is something of a 'stock answer' used by buisnesses to mask the real cause of the job losses. Particularly in the case of Cadburys, their problems are unlikely to be solved by simply moving manufacturing abroad."

He addied that job cuts can be justified as a necessary evolution in the life of a company.

"What's often forgotten is that job cuts may increase efficiency at a company in the short term and in the long term if that company grows and expands it will of course create new jobs," he said.

He advises managers and owners to focus on the health and sustainability of the business.

"A few job losses now, however difficult, could potentially lead to a turnaround in the company's fortunes securing the business for many years to come," he said. "Ultimately managers need to look at their businesses to see where productivity gains can be made and this is where any necessary job cuts should come from."

The Plimsoll's report also highlights some encouraging signs.

Jobs are being created in the food processors sector, mainly by 23 expanding companies looking to grow their workforce to cope with more business. This expansion is further evidence of where good management is creating confidence for the future, he said.

Based on the company's analysis Plimsoll believes that the five best processing trading partners are Aarhuskarlshamn UK, Centura Foods, Cranswick Country Foods, Gerber Juice, and St. Merryn Meat.

Of the top 483 food and drink companies surveyed, only 7 per cent maintained the same level of sales as last year, according to the report.

The total market size increased by 6.2 per cent last year to £31.21bn (€44.8bn).