More British food producers are at risk of going bust within the next six months, one of the country’s biggest credit insurers has warned as it tightens its cover for the industry.

A report by Atradius reveals that there has been a “deteriorating trend for non-payments” by food producers over the last six months as their already-thin profit margins come under intense pressure.

As a result the credit insurer said that its underwriting stance had become “more restrictive” for the food industry in general and “more cautious” on the dairy market in particular.

Credit insurance is crucial for suppliers to protect them from insolvent customers. Losing credit insurance means suppliers have to take a risky bet on maintaining a relationship with a supplier and hoping it will survive and pay its bills on time, or ending its supply arrangement and instantly losing that income.

Food producers and manufacturers have been grappling with a steep rise in import costs since the sterling slump after the outcome of the Brexit vote. The intensely competitive retail environment has meant there has been limited scope for food suppliers to pass the higher costs on to supermarkets, testing their profit margins.

Atradius warned that the tension between supermarkets and suppliers was intensifying due to the consolidation within the retail sector, such as Tesco’s deal to buy Booker and Sainsbury’s pending merger with Asda, which means that grocers will wield even greater purchasing power while food producers “are often small players in a highly fragmented market”.