Terry's of York is to close, with the loss of all 316 jobs.

Owner Kraft Foods plans to transfer production to other factories in Sweden, Belgium, Poland and Slovakia.

The bombshell news was given to workers at the landmark factory near York Racecourse this morning.

John Pollock, director of the plant, said the closure was expected to take place in the second half of next year.

"It is a very difficult time for us all," he said.

"The relationship between the company, employees and the city of York stretches back many, many years."

He said the company would be offering workers settlement packages and assistance in their search for alternative employment. Staff had been given as much notice as possible.

Production of household name brands such as Chocolate Orange, All Gold and Twilight would be transferred to Central and Western Europe. He said this reflected a combination of factors, including a decline in export volumes that, together with the "size and configuration of the site", had resulted in a cost structure that was "unsustainable for current production levels".

He said the company needed to take advantage of new technology in chocolate assortment production at its Swedish factory.

"We simply have no choice but to continue improving our cost structure if we are to be able to invest in growing our brands."

He said York employees had made "terrific efforts" over the years to improve efficiency, but it had still not been possible to preserve the plant.

City of York Council's chief executive, David Atkinson, said today the announcement was "terrible news" for the chocolate industry in York and the city as a whole.

"Terry's association with York goes back over two centuries and its name is synonymous with chocolate making in the city. This is a sad day."

He said the city was well prepared, with a support package for the staff available through Future Prospects.

Council leader Steve Galloway said: "I am deeply shocked by the news. Terry's has been an important part of York for two centuries. We will do everything we possibly can to make sure the workforce is redeployed into other jobs in York.

"We will be working with other agencies like Yorkshire Forward to ensure that manufacturing of some sort is retained on the Terry's site."

Selby MP John Grogan said: "The news will be greeted with dismay and disbelief throughout the city. I am sure the MPs of North Yorkshire from all parties will be astounded at the breaking of an association which dates back to 1767 when the Terry family first began their confectionary business in York."

The chief executive of the Chamber of Commerce in York and North Yorkshire, Len Cruddas, said: "It is very bad news for the local economy.

"Not just the 300 jobs but the knock-on affect of other jobs that rely on Terry's in one way shape or form, such as the various suppliers."

Pat Jones, who runs a corner shop, Pat's Place, just 300 yards from the factory in Bishopthorpe Road, said: "I will be very sorry to see it go. It has been here a long, long time. I will miss the smell. They will probably turn it into another big housing development."

Updated: 10:43 Monday, April 19, 2004