BOSSES at a factory in the region yesterday denied reports that they are threatening to move production of certain items abroad.

Nestl Rowntree chiefs said production of KitKat and Smarties would remain in York, but warned that jobs could be transferred if UK pension costs rise steeply.

There is growing concern about the impact of the Pension Protection Fund (PPF) on the competitiveness of British business.

The fund was set up earlier this year to provide a safety net for occupational pension schemes. Administrators will shortly announce how much businesses will have to pay into the fund.

Newspaper reports say Nestl has been told it may have to pay a levy of as much as £12m a year, when it had been expecting to have to pay only about £300,000.

A spokeswoman for the company said yesterday: "It is our belief that if UK labour costs for any manufacturer get out of line because of increased costs, including pension provision, then this could result in jobs being moved to more competitive locations.

"It would also cause companies to reconsider their current pension scheme offerings, which could lead to further scheme closures.

"We have not said Nestl may stop manufacturing KitKat and Smarties in the UK in respect of the PPF proposals.

"We recognise the Government's concern about the effect of failing pension schemes on members.

"We agree there may be a need for some protection, and are not against the principle of a Pension Protection Fund.

"However, any such fund must be affordable and fair; business contributions to the fund should be capped.