Calls have been made for another industry to be found for Ballybofey after the announcement that the Herdmans plant is to close with the loss of 85 jobs.
Herdmans manufactures linen yarn and has had a mill in Ballybofey for more than 50 years. A further 85 jobs are to go at the company's main base in Sion Mills in Co Tyrone.
The company said it was rationalising production at the main base in Sion Mills, where 635 people are employed. The company also plans to cut weekend shifts at the Sion Mills plant.
It is believed stocks of linen were building up and product could not be sold at a price the market was willing to pay. In a statement, the company said that although linen was a specialised product, it was "not immune from competition from countries with low production costs, fluctuations in fashion, nor the difficulties facing manufacturing companies".
Over recent years many other textile companies based in the north-west have moved production to low-cost countries. It is believed Herdmans may be considering this option.
Many of the employees are in their 40s or 50s, and it is feared it will be difficult for them to find other jobs.
The ATGWU's regional industrial organiser, Mr Jimmy Quinn, said the workers were "in a state of shock" at the closure.
The Ballybofey mill is due to close within 12 weeks, but Mr Quinn said State agencies should try to find an alternative industry for the plant, rather than allowing it to close.
"What is happening here is that the entire manufacturing base in the north-west is being wiped out, and the State agencies on both sides of the Border have questions to answer," Mr Quinn said.
More than 6,000 manufacturing jobs had been lost in the region over recent years, he said.
With this closure, only one large manufacturing plant remained in Ballybofey, Mr Quinn added.
The ATGWU is now seeking a meeting with the IDA, and Mr Quinn called on the Tanaiste, Ms Harney, to take action on the closure. A meeting with management will take place next Wednesday.
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