Mr Bain said the weak dollar made matters worse but the company could mitigate the difficulties by expanding elsewhere, particularly in the Far East.
He added: 'It would be greatly preferable if the UK economic environment encouraged investment in profitable manufacturing activity.'
His comments came as Coats reported improved interim profits. A full contribution from Tootal, the textiles rival that was acquired at the second attempt in May last year, pushed operating profits ahead strongly, although increasing debt and issuing new shares to finance the acquisition restricted pre-tax profits growth and left earnings per share flat.
Operating profits jumped 37 per cent to pounds 69.2m for the six months to 30 June. A nearly doubled interest bill of pounds 19.6m kept the pre-tax profits advance to 10 per cent. Coats made pounds 52.9m compared with pounds 48.1m before tax.
Earnings per shares for the interim period stood still at 4.3p.
Tootal contributed for one month in the first six months of last year. Adjustments made to allow like-for-like comparison show that sales fell by 2 per cent.
Sir David Alliance, the chairman, said that trading conditions in the second half of the year were difficult. 'It seems unlikely that they will improve significantly over the next 12 months.'
The company said performance in Britain had faltered after the general election, and other northern European countries are suffering in the shadow of higher German interest rates.
There had been particular difficulties in Brazil, where political problems were undermining the economy. Coats operated at a loss of pounds 700,000 in the whole of South America in the first half, compared with profits of pounds 6m last time. Brazil was responsible for the reversal.
Mr Bain said that the company was committed to staying in Brazil and that the problems were being tackled. The workforce in Brazil had been reduced from 6,400 to 4,000 and savings worth about pounds 10m a year had been made.
North America provided some good news. The volume of sales and the profit margins improved in the US.
The shares fell 10p to 155p yesterday as City analysts pruned profit forecasts for the full year.
S G Warburg now expects the company to make pre-tax profits of pounds 127.5m. That implies earnings per share of 11.4p.
The half-year dividend has been held at 3p. Mr Bain said the company aimed to build the earnings per share cover of the annual dividend to between 2.5 and 3 times. He hinted that the full-year payment might be maintained at last year's 7p.
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