A chemical factory that looks set to close with the loss of 100 jobs was to have undergone a £2.25m upgrade, it has emerged.

Great Lakes Chemical Corporation is closing its plant in Newton Aycliffe.

But earlier this year it had planned to spend millions of pounds on new equipment to make it more competitive.

Newton Aycliffe site manager Marc Jordens said the company had applied for a substantial grant towards the capital project from Regional Development Agency One NorthEast.

He said: "About six to nine months ago we were proposing to bring the facility more in line with our other plants in the States and that was what the grant was to support.

"That's clearly changed and a number of factors have led us to decide we will take these steps."

Mr Jordens said changing conditions in the speciality chemicals markets and pressure from European competitors had forced the company to transfer production to a plant in the United States.

A spokesman for One NorthEast said that no grant had been awarded to the company.

He said: "We have spoken to the management and have offered to work with them."

Derek Cattell, of the GMB union, who until recently represented members at the plant, said the announcement had come as a complete shock.

He said: "At the time the announcement was made we had still not concluded this year's pay settlement.

"Part of the discussions were about productivity increases, so we were hopeful that the new plant would generate some rewards for the workforce.

"I know there's been difficulties with the market and with over-supply, but it's still quite a shock."

Mr Jordens gave assurances that if the plant does close it would be properly decontaminated, given the toxic nature of the materials it deals with.

The importance of companies such as Great Lakes to the economy was recognised this year with the establishment of a new organisation.

The Pharmaceutical and Speciality Cluster Limited, the first body of its type in the UK, represents over 100 companies in the region and is set to become the North-East's voice of the industry.

Chief executive officer Dr Stan Higgins said: "The announcement from Great Lakes is disappointing, especially when the recent formation of the Cluster was to assist companies like this.

"Speciality chemical companies like Great Lakes are operating in a global market place and are under pressure to ensure that they operate efficiently as possible."