Bakers and suppliers who source ingredients, finished products and machinery from Europe say they are under increasing pressure from the strong euro.

Companies who signed deals months ago have told British Baker the agreements will cost them more than anticipated, as the euro has soared against the pound.

The euro-to-pound exchange rate has increased from 68p in May 2007 to its current value of 79p - which means UK companies will get less for the pound.

The resurgence will hit companies hard, when combined with the effects of rising fuel, energy and commodities costs.

David Marx, sales and marketing director at Giles Foods, which buys raw ingredients and machinery from continental Europe and Ireland, said the situation was making it very difficult for business.

The combination of the strong euro and rising energy and commodities costs are "making things very hairy at the moment", he said, adding that equipment deals signed late last year would now cost the company 15% more than planned due to the resurgent currency.

Colin Lyons, director of Goswell’s Bakery, which manufacturs Vogel’s bread, said the company was having to contend both with increases in the price of soya, which it buys from continental Europe, plus the effect of the increasingly strong euro. "I’m sure the euro is having an indirect effect, as every time we buy soya in euros we are paying more," he added.

John Singleton, sales manager of equipment supplier Benier (UK) said the business is protected against currency fluctuations, as most of its business is conducted in euros, unless clients request otherwise.

Earlier this month, the euro reached a record high, as the European Central Bank refused to cut interest rates, despite international concerns about the currency’s strength.