Politicians, trade unionists and local business leaders have reacted with anger and disappointment to the announcement by Coats Viyella that the group is to close its Saracen factory in Lurgan with the loss of around 500 jobs.

In a statement last week, the company said it had been reviewing the manufacturing capacity in its clothing division following "a very difficult year", when the relative strength of sterling had reduced demand for domestically-produced goods. The statement said the markets for ladies and children's wear had been particularly vulnerable and the high cost base at the Lurgan factory had contributed to increasing losses which could no longer be absorbed. The factory makes ladies' nightwear and children's clothing, mainly for Marks and Spencer.

A spokesman said that work would continue until February, but that there was no chance that closure would be averted.

However, Mr John Edmonds, the general secretary of the GMB union, described the decision as "a scandalous disgrace", and said the firm had rejected a viable rescue plan which included financial support from the IDB and from Marks and Spencer.

The closure is expected to have significant implications for traders in Lurgan, which has only recently recovered from the devastation caused by a massive IRA car bomb in 1992.

Mr John Patterson, secretary of the local Chamber of Trade, said loyal workers had been "kicked in the teeth", and Lurgan did not have the capacity to absorb 500 lost jobs. However, the overall buoyancy in the Northern Ireland clothing sector, which employs between 25,000 and 30,000 people, (or around 25 per cent of the total manufacturing workforce), means there is a possibility that a significant number of workers may find employment with other companies in the industry.

Coats Viyella employs another 2,000 people in Northern Ireland in separate divisions in Derry, Randalstown, and Donaghcloney, and the company has emphasised that none of these operations is under threat.