STRUGGLING Lancashire Tea yesterday issued a notice of its intention to appoint administrators.

The move buys the company a small amount of time as it remains in what it calls “advanced” talks with a potential investor.

An administrator will be appointed if no solution is found quickly.

The Newton-le-Willows based tea-maker employs 40 people and, despite having strong orders, the company has said it has run out of cash.

Lancashire Tea managing director Paul Needham said: “The order book is full but we can’t afford to buy the materials and the tea.

“We are meeting with the potential investors again and we hope they will provide the way ahead.”

He expects a resolution “one way or another” within the next few days. Mr Needham said the company’s cashflow crisis was the result of Royal Bank of Scotland pulling its funding in February this year.

He said: “RBS withdrew our factoring facility, so we didn’t get any money into the business between February and June.”

Despite a significant personal investment into the business from the owners to keep the firm going, the position has remained critical.

The company was founded by Mr Needham and Lynn Hitchen – former colleagues together at Kirkby tea-maker Gold Crown – and it began trading in April, 2006.

However, market penetration has proved difficult, without large advertising budgets to compete with their competitors.

The firm’s development has been stunted by the recession and record tea prices, which have been caused by droughts in tea-growing countries and rising global demand for tea.

Lancashire Tea is stocked by expanding Liverpool retailer Home Bargains, while regional coverage is provided in the north of England by Tesco and Morrisons, and in Lancashire by Asda and Sainsbury’s.

It is also bought by 300 independent customers, including hotels, farm shops and delicatessens.

Four Lancashire Tea shops – in Accrington, Blackburn, Leigh and Wigan – are operated by a separate company and are unaffected by the problems.