Rocketing costs for electricity, feed and fuel are putting a squeeze on profits, with many struggling to break even.

The problems are about to be compounded by the spectre of the EU Welfare of Laying Hens Directive, which will require many farmers to abandon their practices for rearing caged hens in favour of a more expensive colony system.

The new system will double the minimum space allowed per bird in the EU to that provided in many exporting third countries such as the United States.

The directive will affect the whole of Europe but Parliament has decided to implement the changes by 2012.

With many farmers struggling to make ends meet, fears are growing that some will not be able to afford the money needed to invest in the new equipment and will simply abandon chicken farming all together.

Phil Mason, who operates two chicken farms in the York and Ripon areas, said, "It is going to cost farmers around £6,000 to £7,000 to invest in the new technology and if you cannot afford to do this, you may have to shut down.

"We are just breaking even on a quarter of a million birds – it is a lot of hard work for not a lot of reward. A lot of us feel like we are treated like second class citizens and yet chicken is the biggest selling meat in the UK."

There are also concerns that many EU countries will not enforce the legislation as stringently as the UK, meaning that foreign farmers will be able to undercut British producers, reports the Yorkshire Post.

Stewart Elliott, who farms from Bewholme, near Hornsea, said, "In the UK, we have quite a good system in place for making sure we are doing everything correctly, they do not have quite the same infrastructure in some of the Mediterranean countries.

"There has been a big increase in costs for the price of cereals, as well as increases in electricity and labour costs. Some people may have to move away from the industry."

Mr Elliot set up a co-operative style system called Eggsell to allow its members to get a fair price for eggs after seeing the difference between what they were paid and how much eggs sold for in supermarkets.