PRESSURE is growing on soft drinks group Britvic to agree a merger with Scottish counterpart AG Barr after the Fruit Shoot and Tango maker released a disappointing trading update.

Revenue for the year to September 30 slipped 0.8% to £1.3 billion while volumes were down 1.6%, Britvic revealed in an update.

The firm said merger talks with the Irn-Bru manufacturer are "ongoing" as City analysts continued to predict a successful outcome.

Britvic, which also sells products such as Robinsons squash and J2O, was hit by relatively poor summer weather and the recall of Fruit Shoot due to a faulty cap.

Chief executive Paul Moody said: "Following the Fruit Shoot recall in July, we have been focused on returning supply to normalised levels.

"Concurrently, we have been driving an improving performance from the strong brands across the group.

"We continue to place a strong emphasis on cash generation and rigorous cost management across the group."

Cumbernauld-based AG Barr said last month it had approached its larger rival about a merger. The plan is to create a soft drinks giant headed by AG Barr chief executive Roger White but 63%-owned by shareholders in Britvic, maker of Robinsons and Tango.

Britvic said yesterday: "Following the announcement of a potential all share merger with AG Barr, it is confirmed talks are ongoing."

Wayne Brown, analyst at Canaccord Genuity said: "We maintain our view that Britvic shareholders should welcome the approach. We think failure of a successful merger would suggest: a, Britvic's dividend could be at risk; and b, coupled with the worsening outlook on costs and performance of its Irish and French businesses, risks to forecasts remain to the downside."

Shore Capital analyst Phil Carroll said: "We continue to see the proposed merger as value-creating and we also expect it to proceed."

The Takeover Panel recently extended the deadline for talks to October 31.

The Fruit Shoot recall cost Britvic around 2% in sales growth and the firm predicts it will take until January for demand to return to previous levels. The episode will wipe between £15m and £25m from profits over this financial year and next.

UK fourth quarter sales slumped by 4.3%, with the recall sending stills revenues down 14.1% in the final three months, offset partially by 2.1% growth of its fizzy drinks.

Sales in Ireland also fell 8.5% in the fourth quarter and by 9.5% over the full year as consumers cut their spending.

International sales were more resilient, up 8% and 0.7% over the full year respectively, despite the recall impact.

Shares in the Chelmsford-based company, which also makes Pepsi and 7UP under licence, fell 1% or 3.6p to 355.9p.

AG Barr shares dropped 5.4p or 1.2%.

In recent years AG Barr has expanded south by marketing Irn-Bru in northern England and buying exotic juice manufacturer Rubicon.

It is also investing £41.5m in a new manufacturing plant in Milton Keynes to give it greater reach into the south of the country.

It could accelerate this process by using Britvic's distribution reach in the south.