Coats Viyella cuts M&S ties and axes 1,900 clothing jobs are axed

Coats Viyella, the British clothing, furnishing and threads group, yesterday said it was abandoning the contract clothing business, and severing a 50-year relationship with the high street retailer Marks & Spencer.

Coats Viyella, the British clothing, furnishing and threads group, yesterday said it was abandoning the contract clothing business, and severing a 50-year relationship with the high street retailer Marks & Spencer.

As a first step, the 200-year-old textile company is closing four of the division's British factories, with the loss of around 1,900 jobs, the majority held by women. The rest of the contract clothing business has been put up for sale, and a further 3,000 UK jobs and 2,700 overseas are in jeopardy if a buyer does not emerge.

The plants to be closed include knitwear factories at Shepshed, in Leicestershire, and Ollerton and Worksop, in Nottinghamshire, and an underwear factory in Scunthorpe, Lincolnshire. Coats has appointed Deloitte & Touche to dispose of the rest of the business.

Viyella's chief executive, Mike Hartley, added: "This is a desperately sad day ... but we have to face economic truth. The team has done everything conceivable to create a viable business, but the scale and pace of change require levels of investment which ... do not make financial sense."

Coats supplies M&S with 10 per cent of its clothing, and the poor sales performance of the beleaguered high street retailer has had a knock-on impact on the textiles group.

As part of the major restructuring, Coats is also selling its home furnishings and branded clothing divisions, which include Dorma, the UK's biggest bedwear brand, and Van Heusen menswear, and which together employ another 3,200 people mostly in the UK.

The company said it would keep its Jaeger and Viyella brands and retail operations, but would now focus on its Coats global thread business, which employs just 1,650 people in the UK.

Prospects for selling the rump of the contract clothing division are limited.

Coats Viyella's finance director, Kazia Kantor, said: "We are dependent on third parties expressing interest, but my suspicion is that we will know relatively quickly what the levels of interest are, and what kinds of interest."

John Edmonds, general secretary of the GMB union, said: "Thousands of willing workers who are the breadwinners are facing redundancy. Will Stephen Byers [Secretary of State for Trade and Industry] intervene in the same way he did at [the Rover plant at] Longbridge or will the government walk by on the other side?"

Coats Viyella yesterday reported pre-tax profits down at £35.6m for the six months to 30 June, compared with £51.8m last year. The contract clothing business made an operating loss of £8.5m, twice that of last year.

Ms Kantor said the cost to Coats Viyella of withdrawing from the contract clothing business would be, "in a worst case scenario" about £150m, including a £100m in asset write-downs.

Marks & Spencer, which last month made a controversial attempt to cut prices of clothes already ordered from suppliers, yesterday dismissed suggestions it had fallen out with Coats Viyella.

"It was a surprise when we were told about [the decision] on Tuesday," said Cheryl Kuczynski, a spokeswoman for the company. She confirmed that autumn and winter 2000 collections were already in the warehouses. "Our priority is to make sure there is no break in the supply chain and that the availability of merchandise is still what we want it to be. Coats Viyella have not yet talked about their timing and strategy so we don't know how long they intend to carry on production," she said, adding that M&S did not intend to bid for the business.