SHARES in Kerry Group fell by 20p to 535p sterling in London yesterday, while other Irish companies involved in the British beef processing industry prepared for the worst in the wake of the new "mad cow disease" scare. Ireland's two largest beef processors, Kepak and Irish Food Processors, formerly Goodman International, have substantial beef processing operations in Britain, while Dawn Meats, a subsidiary of the Waterford based Queally, group also has British operations.

Kerry Group is a major processor of beef in the south west of England.

These companies, which process and sell British beef, are expected to suffer more than those which just export Irish beef to Britain.

Mr Joe Gill, a food industry analyst with Riada Stockbrokers, warned that the Irish beef industry as whole was facing very serious problems. However, he played down the significance of yesterday's fall in Kerry shares in London. The fall was due to London market makers marking the share down and was not repeated in Dublin, where Kerry was unchanged at 525p.

Mr Gill pointed out that, as one of the largest sausage and cooked meats manufacturer in Britain, Kerry may benefit from a switch by consumers to pork products.

Avon more, the only other quoted food company with exposure to the British beef market, was also unchanged at 155p. A spokesman for Avonmore, which has no processing operation in Britain, said yesterday that the Kilkenny based group was also hopeful that any fall off in export sales of beef to Britain, would be compensated for by increased demand for lamb and pork products. Beef sales account for around 8 per cent of the group's operating profits.

Privately owned beef processors will be more severely affected, believes Mr Gill.

The latest scare is particularly bad news for the Clonee, Co Meath based Kepak Group. The company, which has a turnover estimated to be more than £300 million, recently agreed to buy the Aberdeen based beef group Buchan Meats out of receivership for £2.6 million. Last year, Kepak bought the majority of the assets of another British beef processor, British Beef, for £12 million.

Approximately half of Irish Food Processor's (IFP) £750 million turnover is in Britain, where it operates four fresh beef processing plants and two frozen beef processing facilities. IFP was formed out of the £40 million refinancing of Goodman International in 1995 and some industry sources questioned the group's ability to withstand a prolonged collapse in the British beef industry.

British supermarket chains, which are a major source of business for IFP and the other Irish beef companies, have already started to cancel orders. Irish companies export £200 million worth of beef to Britain each year and supply up to 40 per cent of the beef sold in British supermarkets.