A WARNING by Tony Blair that exclusion from the euro would blight Britain's economic future was underlined last night by a new threat to scores of jobs in the region's fragile car parts industry.

Speaking to German socialists in Nuremburg yesterday, the Prime Minister said Britain must not shy away from its "true destiny" of full involvement in a more closely-integrated Europe.

But closer to home, Britain's self-exclusion from the euro-zone was being blamed for cutbacks at a North-East plant making steering columns.

Japanese manufacturer NSK will today announce a shake-up of its operations in the region.

The company, which makes bearings and steering systems at several plants in Peterlee, County Durham, is expected to announce a series of redundancies as a result of the eight-month restructuring plan.

Employees at NSK's Palma Road plant on the town's South-West Industrial Estate, were yesterday given the bad news.

Workers called The Northern Echo to say they had been told the plant would close, amid fears that most of the 130 factory floor workers and 30-plus white collar staff could lose their jobs.

But a spokesman for the company last night denied the plant would shut by July and said any redundancies would be kept to a "two figure, rather than a three figure sum".

Further details are awaited of a plan to move two of the factory's six production lines to a sister plant in Peterlee's Doxford Drive.

One worker, who did not wish to be named, last night described the sombre mood among the workforce, most of whom are female bread-winners. "There's a lot of people who have families and some have been working there for over 13 years, ever since it opened, so it's pretty gut-wrenching," he said.

The North-East's automotive sector exploded in the 1980s with the arrival of Nissan's massive car plant at Washington, and now employs more than 20,000 people in the region. It has come under increasing pressure in recent years as car makers struggle to cut costs in the face of overproduction in the world's markets.

The strength of the pound is forcing manufacturers to source more components from mainland Europe, and Nissan has led high-profile calls by fellow Japanese inward investors for early entry into the single European currency.

It complains of cost pressures exacerbated by the fact more than two thirds of its Wearside production is exported to the Continent and last year warned suppliers it would be seeking cost reductions of up to 39 per cent.

Yesterday's announcement by NSK to its workers appears to be the latest fall-out from that warning.

The troubled Peterlee factory makes steering columns for Toyota, Mercedes and Rover, which are all suffering their own troubles caused by Britain's place outside the eurozone.

And it is currently winding down production for Nissan's plant a short distance up the A19, amid claims it simply cannot produce its goods cheaply enough.

NSK's grim news was offset by an announcement earlier this week that it was creating more than 50 new jobs at its Peterlee bearings plant, with the help of a £1.1m DTI Regional Selective Assistance grant.

Speaking to Germany's Socialist Party, the SPD, Mr Blair spelt out a vision of closer cooperation on international aid, defence and foreign policy.

Mr Blair said: "New Labour today has no hesitation in viewing the development of European cooperation and integration as having major political benefits.

"Britain, under New Labour leadership, wants to be a full partner with Germany and others in the development of the EU. This is our true destiny.

He added: "On the euro, if the economic tests are met, whose assessment will be complete within two years of the start of the Parliament, we are committed to holding a referendum and joining the single currency. Its success is critical for us all."

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