There will soon be significant consolidation in the bakery sector, the chairman of the UK’s third largest retail bakery chain has predicted.

Cooks’ chairman Geoff Peppiatt said that bakers’ rising costs and falling profit margins meant that consolidation in the sector could not be avoided.

"It is something that needs to be done. No one can continue without fundamentally changing what they do," he warned. "I would expect this industry to look very different to how it does now in 12 months’ time."

Peppiatt claimed that depression in the market meant that major investments could not be justified and that firms that both baked and ran shops were not viable.

"It is likely to mean the separation of manufacturing and retailing. I doubt whether a vertically-integrated model would survive," he suggested.

Peppiatt said that Cooks (formerly Three Cooks), which does not manufacture, but only sells, was unlikely to try to buy any bakery manufacturing operations.

Cooks has around 180 shops in the UK and is third in size behind Greggs and Lyndale Foods