Textile makers decide whether to throw in towel

European textile manufacturers will decide this week whether to abandon their long-running legal battle against UK government aid for a controversial Taiwanese factory due to be built in Northern Ireland, following a recent defeat in the European Court.

Associations representing leading textile producers including Coats Viyella and Courtaulds Textiles are thought to have so far spent some pounds 60,000 fighting the pounds 157m project planned by the Taiwanese Hualon Corporation.

Their objections have been on the grounds that it will create huge unnecessary production capacity in an industry which has already been drastically slimmed down.

To the outrage of existing textile companies, the Government has agreed to provide pounds 61m in subsidies for the plant which will be built on a greenfield site in a deprived area north of Belfast and is planned to create 1,800 jobs.

Earlier this month the industry umbrella-group, the European Association for Apparel and Textiles, lost a European Court challenge against the decision by the European Commission to clear the aid package. Judges said no rules had been broken by the Commission when it approved the state aid.

Brussels-based lawyers acting for the European producers have been examining the judgment and are likely to ask the court for further clarification. John Wilson, director general of the British Apparel and Textiles Confederation, said he had been deeply disappointed by the judgment and was discussing the way forward with his counterparts on the Continent.

He explained: "The court seems to be suggesting that because Hualon say that is what they are going to do then we should not contest it. That seems crazy to me. We are looking at several aspects of the ruling though there don't seem to be any points of law we can contest."

If the producers decide against an appeal it would provide a boost for Northern Ireland's Industrial Development Board (IDB), the government agency for inward investment, and clear the way for the plant's construction three years after the original announcement.

However, there are signs that the IDB is reviewing the scale of the aid package, which depends on the full number of jobs being created. The IDB's chief executive visited Taiwan earlier this month and is believed to have discussed the subsidy with Hualon.

Mr Wilson insisted the campaign mounted by producers had not been a total failure. It had succeeded in delaying the project and highlighted the crisis affecting the industry.