UNION leaders angrily blamed Britain’s employment laws last night after Peugeot dealt another massive blow to the car manufacturing industry with the announcement of the closure of its Ryton factory and the loss of nearly 4,000 jobs.

But as the French company said that the Midlands site was no longer competitive, and prepared for more development in eastern Europe, the Government voiced frustration that the carmaker had taken up none of its offers to encourage production to continue at Ryton, near Coventry.

Alan Johnson, the Trade and Industry Secretary, said that he was “extremely disappointed given the substantial quality and productivity improvements delivered by the workforce” and that the Government had offered grants to help with investment.

Privately ministers believe that the decision has been forced on Peugeot because of increasingly stiff competition from rival makers and the need to cut costs. They have been braced for the move for some time.

The company will halve production at Ryton in the summer and close the plant, which once made some of Britain’s classic cars, next year. Some 2,300 jobs will go from the factory, which makes the 206 model, but about 1,500 more may be lost in the supply chain and the local economy.

The closure is another blow to manufacturing in the West Midlands, coming a year after MG Rover collapsed with the loss of more than 10,000 jobs and months after Jaguar closed its Browns Lane site.

Tony Woodley, the general secretary of the T&G union, said: “We warned this Government three years ago that the labour laws in this country, which allow people to be sacked and plants to be closed cheaply, quickly and easily, needed to be tightened up.”

Derek Simpson, the general secretary of Amicus, said: “It is inconceivable that French workers at Peugeot would be laid off on this magnitude.” Alan Duncan, the Shadow Trade and Industry Secretary, said: “These job losses are an indication that all is not well with the economy.”

Peugeot blamed economics and the efficiency of the plant, which only produces one model, compared with its factories in France, Spain and Slovakia, which can produce several models on one production line.

Last night the company denied that the decision had anything to do with Britain’s more flexible employment laws. “At the beginning of 2006, the group carried out a study of its industrial strategy which showed that the cost of the Ryton factory was too high and that the site lacked competitiveness,” a spokeswoman said.

The Peugeot 206 is reaching the end of its model life. “It would have needed a very great investment to produce a new model and the extra costs would have still remained high,” she said.

Peugeot Citroën has brought out the 207 model this month in France. The company is counting heavily on the car, built at a cost of €4 billion (£2.8 billion) in new investment, to pull it out of a dip in sales over the past two years.

Peugeot’s workforce were told of the decision yesterday by Jean Martin Folz, the French carmaker’s chief executive, who briefed them at the same time as union leaders.

Expressing disappointment, Mr Johnson said: “The DTI has done everything possible to encourage the company to continue manufacturing at Ryton. As recently as 2004 we offered a grant of £14.4 million towards the cost of developing the plant in order for it to deal with more than one model. We have also provided funds towards collaborative R&D projects involving Peugeot.”

Peugeot’s decision to close Ryton ends nearly thirty years of ownership of the factory, which began as an engine plant owned by Rootes in 1939.

Peugeot workers are expected to join a May Day union rally in Central London, that will call for tougher employment laws.

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