Food suppliers in Yorkshire are feeling the squeeze of the supermarket price war, an insolvency expert has warned.

Insolvency specialist Begbies Traynor said that for Yorkshire’s network of food suppliers – many of whom are smaller producers and farmers – the food retail industry had never been tougher.

As the UK’s largest supermarkets up their game in the race to win back customers from discounters Aldi and Lidl, strategies of slashing prices and delaying payments to suppliers were putting the region’s food and drink sector at risk of serious financial distress, it said.

Begbies Traynor’s Red Flag Alert research for the second quarter of 2015 showed a 38% rise to 5,258 in the number of UK food retailers facing “significant” financial distress over the past year.

But it said the food supply chain that keeps these stores stocked was by far the biggest loser – and a high concentration of food and drink businesses in Yorkshire, which contribute £1.7bn to the regional economy, has left the region particularly vulnerable

During the second quarter, Yorkshire’s food and beverage manufacturers saw a 69% rise to 149 in the number of businesses showing “significant” distress – up from 88 at the same time last year. In the last three months alone, 20 more businesses in the sector began to show symptoms of distress.

Across the UK as a whole, the sector has seen a 54% hike in distress levels, with 1,622 companies affected, up from 1,052 in the second quarter of last year.

Huddersfield man Peter Sargent, a partner at Begbies Traynor, said: “With Tesco recently hailing the success of its first quarter performance after four rounds of price cuts since January and even Waitrose now joining the sector’s discounting foray, clearly the novelty of a bargain continues to resonate with consumers.

“Unfortunately, the retail environment is set to become even bleaker for Yorkshire’s many small food suppliers who are facing the harsh reality that price slashing is not just a short term pain but something that’s here to stay.”

Mr Sargent said: “The supermarkets have managed to successfully rebase their own models by reducing product ranges, moving away from bulk-buy offers and squeezing supplier margins still further, while failing to clean up their act on late payments – taking more than a month longer than agreed terms to settle debts with suppliers.

“Some are even looking into launching their own food manufacturing facilities to give them even tighter control over costs and the ability to offer still more aggressive pricing – signalling yet another nightmare scenario on the horizon for Yorkshire’s food supply companies, which are so vital to our regional economy.”

Julie Palmer, partner and retail expert at Begbies Traynor, said she welcomed the fact that the Groceries Code Adjudicator now had the power to fine UK supermarkets up to 1% of their UK turnover for unfair practices.

But she added that it was “unlikely to have a major positive impact for the supply chain”, with many suppliers reluctant to raise issues for fear of retribution from their major sources of income.