Workers in Selkirk clocking on for the morning shift received official letters on Friday and were sent home for the day.

We are very, very reluctant to do what we've done and are very sad that its come to this, but you cannot fund losses of that sort.

Managing director Peter Forrest

The Transport and General Workers' Union said Dawson had "totally disregarded" its responsibility to employees, their families and respective communities.

Regional organiser, Gerry Skelton, said: "Once again, we have seen by this announcement that the senior executives in Dawson International plc have no understanding of the meaning of the word loyalty.

"At Laidlaw and Fairgrieve, the workforce have worked extremely hard improving the quality of the product, improving productivity, reaching record targets and have stayed loyal despite suffering massive financial penalties themselves, only to have their financial security withdrawn by this faceless board."

Staff were called to meetings

He added that the union was in touch with local enterprise companies and the Scottish Textile Manufacturing Association to discuss the possibility of retaining the company, including a management buy-out.

One worker, Robert Duff, said he was devastated by the news, which he heard from a friend while going in for his shift.

"I said, I'm going to my work. He said: 'It'll be a waste of time, that's it closed.'"

Managing director, Peter Forrest, dismissed claims the company had deserted the communities as "ludicrous".

He said: "We cannot make a viable business out of Laidlaw & Fairgrieve. We've stuck with it for three years, its been up for sale for two years.

No buyer for firm

"We've tried to engage sales, both management buy-outs and from outside. If you are in a competitive, manufacturing, exporting business at the medium end of textiles today, no bank wants to know.

"We are very, very reluctant to do what we've done and are very sad that its come to this, but you cannot fund losses of that sort."

The company said no buyer had emerged for Laidlaw & Fairgrieve since it announced its strategy to reposition itself as a niche cashmere business in 1998.

Pringle was sold off

Dawson chief executive, Paul Munn, said: "Current trading conditions and the future outlook for the woollen yarn market indicate that no buyer is likely to emerge in the foreseeable future.

"The board has made a decision to close the business to ensure it does not have a detrimental effect on the continuing success of our profitable niche cashmere business."

The company said Laidlaw & Fairgrieve had been badly hit by competitive pressure from the Far East and Asia where competitors operated on a much lower cost base.

This had been compounded by the strength of sterling pushing up export prices to an uncompetitive level, the company said.

Pringle sale

The news follows the sale in February of the Pringle brand to the Hong Kong-based Fang Brothers Knitting Ltd in a deal worth �10m.

That sale resulted in the loss of 140 jobs at the company's factories in Hawick and Galashiels.

The news is a further blow to Scotland's ailing textiles industry which has been hit by a succession of closures and lay-offs.

Daks Simpson and Baird Clothing have both lost substantial contracts with Marks and Spencer, while Russell Europe and Levi have been forced to cut jobs in the face of stiff overseas competition.

• Meanwhile, 95 workers at the Ailsa-Troon shipbuilding yard in Ayrshire have been told they are facing redundancy.

  The jobs will be lost next month unless the Ministry of Defence brings forward a vital order for eight landing craft.

  Work is due to begin next February but the yard will complete its current orders in July.