Circatex bosses received the DTI grant in December 2001

Union officials at the Circatex plant in South Shields have been told the company has to shave 15% off its budget, because of cheap foreign imports of printed circuit boards.

The company, which is already facing a legal challenge over millions of pounds given to it in state grants, has large debts following a management buyout two years ago.

Mel Barras, regional organiser of the Amicus union, described the announcement as "devastating".

He said: "The company is running to a stand still. They are being hit by cheap imports of circuit boards from China.

"Circatex is making the same number of boards, but getting paid at loss less for them.

Shift premiums

"The banks are now saying they can't give them anymore money.

"We've been told there has to be up to 100 job losses and a cut in basic pay and a cut in shift premiums.

"If we don't accept these temporary cuts we have been told the receiver will be brought in within three months."

The company was given a �3.75m grant to aid a management buy-out when previous owners Viasystems decided to close the plant and a sister factory in North Tyneside.

Rival UK firms claim the December 2001 grant breeched European Union competition rules.

If Circatex is forced to pay back the cash, the future of some or all of the South Shields jobs would be in doubt.

Six companies are preparing an official complaint to the European Commission because they say the Department of Trade and Industry (DTI) grant gave Circatex an unfair advantage.

Compensation package

Mr Barras added: "People have gone through a lot to make the factory viable and this is an absolute bombshell.

"The company have been as open with us as they can, but we will have to see what the workforce says."

Circatex is due to make a statement later.

Earlier this year former workers made redundant from Viasystems won a payout of �2.5m.

The DTI agreed to a compensation package, which should see some 800 former workers get about �2,500 each.

Union officials successfully argued that members were not properly consulted about the closure plans.