The Fenland Foods site in Grantham, Lincolnshire, makes Italian ready meals for Marks & Spencer.

Northern Foods says it will be "mothballed" from August.

It is currently looking for other customers to fill the gap left by the withdrawal of M&S product lines at the plant which was built for M&S in 1987 but admits the process could take up to three years.

Chief executive, Stefan Barden, said it was "unrealistic" to retain staff while it looked for new customers.

Northern said today's decision had been taken by mutual agreement with M&S in accordance with the Leeds firm's strategy "to continue with business only where terms generate an adequate return for the group's shareholders".

A 90-day consultation process will begin today with the 730 workers at the business, which broke even after £45m of sales during the last financial year.

Mr Barden added: "Our immediate task is to support our loyal employees through the consultation period. We have plans to invest in the site so that it can continue to be a leader in its market."

Today's news follows an announcement that the company is looking to axe around 25 to 30 jobs at its Batley-based Fox's Biscuits factory, where it currently employs around 1,280 people, in response to "changing patterns of demand".

Northern Foods, whose brands also include Goodfellas Pizza and Fox's biscuits, employs around 11,000 people in total at 22 operating sites in the UK and Ireland.

It has sought recently to bolster its fortunes by ditching lower-margin business and refocusing on faster-growing markets such as ready meals, sandwiches and salads and puddings.

Last year, the company sold its speciality bread, chilled pastry, cakes and flour mill operations as it looks to focus on key brands as part of a drive to improve performance.

Trade with Asda, M&S, Morrisons, Sainsbury's and Tesco represents 76 per cent of total revenues for the group.

It said today's announcement was not expected to impact materially the group's profit before tax and restructuring items.