FRESH evidence of the cash crisis facing discount grocery chain Kwik Save emerged this weekend – only days after it announced the closure of 79 stores.

The Sunday Times disclosed last week that dairy group Arla had stopped supplying Kwik Save with milk because of “payment problems”. And now British Bakeries – part of Premier Foods, with brands such as Hovis and Mothers Pride – has halted bread deliveries to Kwik Save.

Premier said it could not comment on commercial agreements. But reliable sources confirmed that British Bakeries has stopped supplying Kwik Save. As with Arla, “payment problems’’ were alleged to be the reason.

Some Kwik Save stores have not received any cigarettes for months. And there is said to have been disruption to the chain’s supplies of chilled and frozen goods.

Kwik Save, which was shed by Somerfield in February last year, said three months ago that it had received a cash injection from Irish property tycoon Brendan Murtagh. Paul Niklas, who headed Kwik Save for a few months after the Somerfield disposal, returned to run the business.

But in March, Kwik Save came close to going into administration. It struck a short-term deal with Nisa-Today’s to replenish its stores, many of which were running out of basic goods. The arrangement lasted only a few weeks.

Kwik Save approached Costcutter last month, hoping to secure access to a number of brands for which it had been impossible to negotiate terms with manufacturers. But Costcutter said it would not start supplying unless it could secure payment upfront. It is not clear how much money was injected by Murtagh in the February restructuring: a figure of £50m was suggested, but the total is thought to have been far smaller. Now Murtagh is said to be calling the shots.

Restructuring experts at the accountancy firm KPMG have been called in to see if there is a way that Kwik Save can be saved from bankruptcy. If it does go bust, it is thought likely that Grant Thornton will be appointed as administrators. Insiders at KPMG reckon that it will take a week or two to determine whether the business can be rescued.

The retailer announced the closure of 79 of its 226 stores last Tuesday. It is estimated that 800 people lost their jobs.

Kwik Save was unavailable for comment.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax