Convenience chain My Local has formally gone into administration putting 1,658 jobs at risk.
The embattled retailer, which is set to shut 90 shops, has appointed KPMG to act as administrators.
Formerly owned by Morrisons and called M Local, the supermarket chain was snapped up by Greybull Capital in a deal reportedly worth £25m last year.
Morrisons has confirmed that "if no buyer is found" for My Local the retail giant will give jobs to former workers.
In a statement last week, Morrisons said: "We are saddened and disappointed to learn that My Local is about to enter administration.
"We want to help our former colleagues who now work for My Local.
"We can therefore confirm that if no buyer is found, and stores close, we will welcome our former colleagues back to a job at Morrisons."
Britain's decision to quit the European Union is also set to hit consumer confidence, Richard Lim, chief executive, Retail Economics said.
"The collapse of My Local is yet further evidence of turbulent times facing British retailers and it appears trading conditions are only going to get tougher.
"The vote to leave the EU will heighten uncertainty on the retail industry and cast a spotlight on businesses overly reliant on the good times. We are entering uncharted waters with Brexit and our recent poll showed 61 per cent of consumers feel that their personal finances will worsen in the coming months," he said.
"With confidence on a knife-edge, consumers will boost savings and rein in spending on non-essentials which will leave some retailers facing unnerving declines in sales and precarious financial positions."