BRITISH Sugar dealt a major blow to hundreds of beet growers in the region last night after announcing plans to close its York factory.

About 1,200 farmers in the Yorkshire area are likely to be affected by plans to shut the beet sugar factory, which employs 102 people.

British Sugar is also closing a factory in Shropshire as part of cost-cutting measures which will see it reduce its number of factories from six to four.

The National Farmers' Union last night described the decision as "a kick in the teeth" for its members, who face losing contracts to supply British Sugar. It has pledged to negotiate the best possible compensation package from British Sugar owner Associated British Foods.

A spokeswoman said: "The timing is a bolt from the blue. Sugar beet is the most profitable of the mainstream arable products and whatever farmers do instead is not going to return as much as sugar."

Sugar beet is grown for the factory across North Yorkshire, the Vale of York and the East Riding. The NFU will meet British Sugar this week to discuss its supply chain.

The changes are likely to be greeted more positively in East Anglia, as British Sugar plans to buy the 83,000 tonnes of additional sugar quota available in the UK as a result of EU reform.

It expects to increase production at its four remaining factories in Norfolk, Suffolk and Nottinghamshire.

The York site, which dates back to 1926, is likely to close at the end of the 2006/2007 production cycle, which runs from September to February.

A spokesman for the company said it was closing the York site due to poorer crop yields in the North of England and cuts in sugar beet prices.

British Sugar provides about half of the UK's sugar requirement, and works with 7,000 beet supplies, processing nine million tonnes of sugar beet.

Anne McIntosh, MP for the Vale of York, said: "The closure of the sugar factory is a severe blow to local farmers in the Vale of York. In spite of recent reforms of the world trade organisation and the European Union, sugar beet remains an important rotation crop and has provided a stable income for local producers."

The MP said she would seek urgent talks with managers at the York factory to discuss the implications of the decision.

In April, Associated British Foods blamed soaring energy costs and declining sugar prices across Europe for a fall in profits. It blamed the shake-up of the EU sugar regime, which will cut prices of sugar and beet by more than a third from July.