ABOUT 500 people at a food factory stand to lose their jobs after supermarket Asda pulled the plug on a £40 million contract.

The majority of staff at Ferndale Foods at Thamesmead are now braced for a period of uncertainty after the supermarket awarded its chilled, ready-made meals contract to another company.

Ferndale, based on the Hailey Road Business Park, has been supplying Asda with 90 product lines since 1996. It was given a 12-week notice period earlier this month and sales began winding down last week.

Staff have been issued with “consultation notices in contemplation of wholesale redundancies”. Those on temporary contracts have been the first to be laid off – the rest may lose their jobs in mid December.

Ferndale Foods production manager Bridget Cooper said: “We’ve worked our socks off for Asda. People just can’t understand it.”

Asda says it is making the switch because it wants to relaunch its ready meals range this autumn. It says it gave 18 months’ notice that it was putting the contract up for bid.

An Asda spokesman said: “This is a decision we haven’t taken lightly.”

But Ferndale’s management, which has just completed a £2.2m factory extension, has reacted angrily. Managing director James Logan said there had been no price tender and Asda had assured the company it had done nothing wrong.

Ferndale believes Asda did not follow the Supermarket Code of Practice, but the Office of Fair Trading has concluded the code did not apply in this case.

Ferndale retains its smaller contract of supplying convenience foods to Asda, as well as Tesco and Waitrose.