More than 120 workers are to lose their jobs when the Ballasalla firm, which manufactures slippers for Marks & Spencer, ends production in April.

Parent company Lambert Howarth is blaming cheap foreign competition, pressure from High Street retailers to reduce prices and spiralling costs in the Island, for its decision to transfer production to China.

Ronaldsway Shoe Company managing director Jack Yardley said the government had to act fast to save manufacturing in the Island.

He said his company had seen its electricity costs rocket by 50 per cent since November 2003, while transport costs had tripled since November last year and there had been a five-fold increase in waste disposal costs in two years.

Mr Yardley said: 'It is too late for us now, but the government has got to make the Island more competitive.

'In the past 12 months it has become far cheaper to manufacture in the UK than here in the Island.

'If the government thinks we can be competitive, then they are in cloud cuckoo land.'

Mr Yardley admitted the government had been very helpful in the past, providing grant assistance for machinery which had enabled the company to become automated.

But he said spiralling costs of overheads had been his company's downfall – and compared costs with those at Lambert Howarth's other slipper factory in Ayrshire which, too, was now facing closure.

He claimed electricity costs, which he said had gone up 50 per cent since November 2003, were nearly treble what they are in Scotland.

Mr Yardley said transportation costs were also making the Island uncompetitive. Around 60 per cent of the company's slippers were shipped in a six-week period for the Christmas season. He explained that these costs had tripled since last November.

Pointing out the hike in waste disposal costs from £20 to £100 a tonne in two years, Mr Yardley said: 'The government has spent £47million on the incinerator but it would now be cheaper to ship waste to a landfill in the UK – that's just ludicrous.'

Trade and Industry Minister Alex Downie insisted the closure of the Ronaldsway Shoe Company was 'entirely in line with global trends'.

He said the price of electricity was actually cheaper than it was five years ago and that the increase in waste disposal costs was designed to encourage recycling.

He insisted that transportation costs were not the remit of government, but added: 'We would be more than willing to sit down with any business and give them advice on how they can reduce costs of transport, energy and waste disposal.'

Mr Downie said it was possible for the Island to be 'extremely competitive' in certain high-skill, capital-intensive and innovative areas.

But he said the Ronaldsway Shoe Company, which had to import its raw materials and export the finished product, could not expect to compete with China which could do the same job at a fifth of the cost.

The minister said that his department was carrying out an appraisal of all staff at the shoe company with a view to finding jobs for the 'vast majority' by the time the factory closes in April.