German clothing maker Klaus Steilmann GmbH & Co KG says it is to close its production site in Essen, Germany, and will lay off its 65 employees by the end of February.

The news was announced at a meeting on Wednesday and has been prompted by lower production costs in Eastern Europe and the Far East. Managing director Ruediger Knaup said the company is negotiating with trade unions to provide a social plan for those employees who are losing their jobs.

Klaus Steilmann has invested heavily in its Romanian production facilities where it is able to take advantage of lower overheads and costs estimated to be around one-third of those incurred in Germany.

Steilmann Romania was set up 12 years ago to manage the group's five clothing operations, which now employ around 14,000 people.

In December 2001 the group said it was spending $20 million on a new textile plant in central Romania.