Gloom deepens as 1,700 jobs go

Unemployment: Manufacturing output falling at sharpest rate for seven years as CBI claims fears are spreading

THE DEEPENING economic downturn claimed another 1,700 jobs yesterday, increasing pressure on the Bank of England's monetary policy committee to cut interest rates again next week.

Courtaulds Textiles, a big supplier of clothing to Marks & Spencer, announced plans to cut 1,220 jobs at its Claremont Garments subsidiary, while the United Glass plant in St Helens, Merseyside, is to close with the loss of 450 jobs.

The news coincided with the publication of a survey by the Chartered Institute of Purchasing Managers which showed manufacturing output falling at its sharpest rate forseven years. Separately, the Confederation of British Industry warned that the decline in business confidence has now spread from the manufacturing industry to the service sector.

More positive news came from Peugeot, which said it was expanding UK production at its car factory at Ryton, Coventry, creating 900 jobs. The company estimated that the development could lead to the creation of a further 2,000 jobs at supply firms in the Midlands.

The job losses at Courtaulds Textiles come just two months after it acquired the struggling Claremont Garments business. The jobs will go at eight factories which are being closed. These include plants in Newton Aycliffe and Durham in the North-east; Shoreham-by-Sea, West Sussex; and Giltbrook and Sandiacre in the East Midlands.

The news is the latest in a string of redundancy announcements in the UK textile sector. Last week Dewhirst, which makes men's shirts and ladies trousers for M&S, said it was cutting 600 jobs. William Baird, another M&S supplier, cut 477 job a week earlier.

The cuts follow a slump in consumer demand, the continued strength of the pound and a decline in sales at M&S which reported a 23 per cent fall in profits a month ago. M&S wants its suppliers to reduce the cost of the goods they make. With Britain's high labour costs, the companies are being forced to push supply to cheaper locations overseas.

However, Courtaulds Textiles denied the cuts related to M&S's plans to shift more manufacturing to cheaper overseas locations. Colin Dyer, its chief executive, said the closures were necessary to redress over-supply in the Claremont factories which make ladies casual wear, lingerie and formal wear for M&S.

The GMB trade union attacked Courtaulds for "asset-stripping" and said it would be working to reverse the decision.

When Courtaulds bought loss-making Claremont Garments it ordered a review of its operations. The company said the cuts were in line with expectations and it will detail the costs in a trading statement next month. "Our intention in making these closures and the cost-cutting that comes with them, plus the other cost-cutting we've done ... is to restore the business to profitability for next year," said Mr Dyer.