15/04/2014 08:18 BST | Updated 15/04/2014 08:59 BST

Imperial Tobacco To Shut Nottingham Factory Amid Falling Cigarette Volumes

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An employee checks finished John Player Special (JPS) cigarettes, manufactured by Imperial Tobacco Group Plc, at the company's factory in Nottingham, U.K., on Friday, Feb. 1, 2013. Imperial Tobacco Group Plc is Europe's second-biggest tobacco company and generates about 40 percent of its profit from the region. Photographer: Chris Ratcliffe/Bloomberg via Getty Images

Imperial Tobacco is to end cigarette manufacturing in the UK after announcing plans to close its factory in Nottingham with the loss of up to 540 jobs.

The Bristol-based company, which employs 1,700 people in the UK, said the factory has the capacity to make 36 billion cigarettes a year but will only produce 17 billion in 2014.

It blamed declining industry volumes in Europe, which have been impacted by increasing regulation and taxation and the growth in illicit trade.

Imperial's history in Nottingham dates back to 1877 when John Player bought a small tobacco manufacturing business in Broad Marsh. It has been at its current site in the city since 1972.

The company said the closure plan will be implemented over the next two years and it will look to redeploy staff where possible. It is also closing a production site in Nantes, France, where 320 people are employed.

Imperial said it will relocate production in Nottingham to other European factories and outsource distribution operations at the site to a third party.

Chief executive Alison Cooper said the restructuring plans were part of an ongoing drive for savings of £300 million a year from September 2018.

She added: "These projects are an essential part of securing the sustainable future of the business.

"The prospect of job losses is always regrettable and we will be doing all we can to support employees and ensure that they are treated in a fair and responsible manner."

The company, which has 46 manufacturing sites worldwide, closed a cigar factory in Bristol in 2010.

It grew operating profits by 1% to £3.2 billion last year, with revenues down by 1% to £7 billion. Volumes of frontline brands including Davidoff, Lambert & Butler, John Player Special and Gauloises declined 2% to 129 billion.