The east-Cork economy was dealt a major blow yesterday with the announcement of the closure of Youghal Carpet Yarns which employs 260 people.

Management at the Kilacloyne plant, just outside Cork city, said the decision to close the factory was taken because a hoped-for recovery in the contract weaving market had not materialised.

Youghal Carpet sales took an enormous blow as a result of the terrorist attacks in the US on September 11th, with the plant's trading losses continuing to accelerate this year.

Management at Youghal Carpet says the downturn in demand for carpets had worldwide repercussions for the industry and the raw materials for carpet-making which it supplies.

A limited number of personnel will be required to close down operations at the Co Cork plant over the coming weeks with the majority of staff working their last shift yesterday.

Youghal Carpet opened in 1969 and employed more than 600 people at the height of its success. The plant manufactured raw materials for carpet-makers and exported chiefly to European and US markets.

Over the past 15 years, it has undergone a series of rationalisation plans and takeovers, the most recent of which was its acquisition by Mr George Courri, the US-based businessman, in 2000.

Last December, the firm announced the plant would close early this year after SIPTU rejected rationalisation proposals which proposed the loss of up to 100 jobs.

However, a crisis at the plant was averted after a survival plan was agreed at Labour Relations Commission talks between SIPTU and management.

SIPTU's South West regional secretary, Mr Joe O'Flynn, said the decision to close the plant yesterday was extremely disappointing.

He called for immediate action to ensure the continued employment of Youghal Carpet workers.

"We will be talking to the Government and IDA to see if we can find an alternative investor...we will be doing a job of work similar to Irish Ispat and GSI when they closed, and that's to get FÁS to do a skills audit and devise a number of training programmes."

Mandate union spokesman, Mr Matty O'Callaghan, claimed workers were angry at the way they had been treated by the company over the years.

He said it was very depressing for staff to have gone through all the anxiety of the Labour Relations Commissions talks and the rationalisation programme, only to end up without a job two months later.

Meanwhile, the Tánaiste and Minister for Enterprise, Trade and Employment, Ms Harney, expressed her deep disappointment at the announcement of job losses as a result of the closure of Youghal Carpet and Ardagh plc.

"This is a huge blow to the workforce in both companies and their families. Many of these workers have spent their entire working career with these companies."

She said she had spoken with the director general of FÁS and he would immediately arrange to carry out an assessment of the skills of the workforce in each company with a view to re-training and securing new employment.

The employers' representative group, IBEC, said the job losses at Youghal Carpet and Ardagh reflected the competitiveness difficulties of Irish firms and identified wage, insurance and energy costs as areas of particular concern.

Meanwhile, Cork Labour Party Councillor, Mr John Mulvihill, has called on the Government to try to rescue the plant in order to salvage the economy of the East Cork area. "Even at this stage, I would appeal to the Government and to the Tánaiste to try and rescue the plant."

Three years ago, East Cork Foods closed with the loss of more than 100 jobs, while 300 people were made redundant when the Irish Ispat Steel Plant at Haulbowline shut down last year.