Purico, a subsidiary of Nottingham-based Melton Medes, bought the cigarette paper producing mill for 27.5m last year.

However, relations soured after Puri tried to renegotiate working conditions and rates of pay. In September the firms 700 employees went on strike and in December 220 were made redundant.

Members of the Paper, Allied-Industrial, Chemical and Energy Workers International Union (PACE) rejected Puricos proposals and are working under the terms of original contracts.

PACE director of special projects Joe Drexler said Purico was trying to coerce workers into paying for capital investment in the plant through pay cuts: "He just came in like a sledgehammer. Union members have lost faith in Mr Puri."

Drexler added that PACE members appreciated the "continuous dialogue" they had been in with the GPMU and that the situation was being monitored by Republican senator Jesse Helms and Democrat senator John Edwards.

Puri said he was trying to look at the business from an objective perspective before making any decisions.

Story by John Davies