Coats Viyella, Britain's biggest textile group, yesterday warned of UK job losses after announcing it would accelerate the transfer of production outside the UK.
The company unveiled a pounds 50m restructuring provision as part of plans to cope with the phasing-out in 2002 of the Multi-Fibres Agreement, the multilateral trading arrangement which imposes textiles production quotas on developing countries to protect higher-cost Western producers. The programme is expected to deliver pounds 10m lower costs this year, rising to pounds 37m after 1997.
Neville Bain, chief executive, said the group's world-wide workforce of 74,000, including 28,000 in the UK, would be affected by the restructuring, which would mean some plant closures, although the majority of the jobs would be lost overseas. He refused to elaborate on numbers in advance of informing the employees. "We have announced [this restructuring] early, but what we have not done is talk to the people involved on the sites concerned."
He denied the move was in anticipation of a Labour government bringing in a statutory minimum wage, which could hit the textile industry.
However, he agreed that any measure that affected UK competitiveness would be harmful to employment here "and must accelerate the trend offshore".
It is thought that around 80 per cent of the charge will cover redundancy payments. But the money will not be evenly distributed. In India, where the group would like to see the 14,000 workforce cut to nearer 8,500, the cost of an individual redundancy is around pounds 2,000, compared with over pounds 20,000 in Europe. However, Coats is restricted in the sub-continent by laws which prevent compulsory redundancy.
Mr Bain said one of the main drivers behind the restructuring was the need to speed up the move to offshore sourcing in advance of the end of the Multi-Fibres Agreement.
Coats shares fell just 1p to 199p yesterday. The group also announced a 6.4 per cent dip in underlying profits to pounds 143m, before provisions and losses on the disposal of businesses. Analysts cut forecasts for this year by around pounds 30m to between pounds 130m and pounds 140m.Reuse content