Production will be shifted to Gloucestershire and east London

Dairy Crest announced its depot in Totnes would be closed, saying it was impossible to expand and modernise on the site in Station Yard.

The dairy said it was likely all 164 staff would lose their jobs.

Union officials said they intended to fight the plans. A spokesman said it was a "devastating blow" as the dairy was the largest employer in Totnes.

Union challenge

Production at the plant, which opened in 1934, would be transferred to Gloucestershire and east London.

Dairy Crest bought the plant from Unigate in 2000. A spokesman said the plant could not be modernised as it was landlocked by the railway station and housing.

The Transport and General Workers' Union (T&G) reacted angrily to the closure, which is expected to be completed by November at a cost of �3m.

A spokesman said: "We cannot let this closure plan go unchallenged."

The plant produces milk for local deliveries as well as the Morrisons and Sainsbury supermarkets.